FT : US states line up to attract billions in electric vehicle spending

US states line up to attract billions in electric vehicle spending
‘Detroit has moved to west Tennessee,’ says mayor where Ford plans battery and truck plants

Cotton and soyabeans grow in the west Tennessee fields where, in four years, Ford Motor plans to manufacture electric trucks.

Last month Ford and its partner SK Innovation said they would invest $11bn to construct an electric vehicle assembly plant, battery factory and supplier park on the farmland 50 miles north-east of Memphis, plus two battery plants in neighbouring Kentucky.

The billions of dollars to be invested highlight the economic stakes for communities as the automotive industry commits to massive spending to switch away from assembling petrol-power vehicles.

US towns, states and regions are vying to lure new electric vehicle plants. Ford’s Tennessee complex, to be dubbed Blue Oval City, will rise in an area that Haywood County mayor David Livingston said had been haemorrhaging population since the second world war.

“EVs are the wave of the future,” Livingston said. “I felt like I was on third base in the 1960 World Series when Bill Mazeroski hit a grand slam, that’s how ecstatic I am.”

The car industry is critical to the US economy. It accounted for 3 per cent of US gross domestic product last year and employed more than 900,000 people in manufacturing vehicles and parts with another 200,000 in sales. Average annual pay totals $84,000, $20,000 more than the average for all US industries.

But the spoils are not evenly distributed. Carmakers and their supply chains have historically been clustered in the Midwest, starting with Henry Ford cranking out Model Ts in south-east Michigan.

The economic benefits began to spread more widely in the 1970s and 1980s as US carmakers opened factories in southern states. Japanese and German carmakers followed suit. Today Kentucky, Tennessee and Alabama — the southern sections of an “auto alley” that runs from Michigan — all boast healthy car manufacturing sectors.


With electrification now rolling across the industry, cities and states are competing to either preserve their share of the economic benefits — or win a bigger piece of the pie. A Michigan council formed by Governor Gretchen Whitmer said in a 2020 report that while the state remained a global leader in electric and autonomous vehicle technology, “the margin of our lead has been closing”.

Detroit’s title of “Motor City” is one that rivals would love to steal. Tennessee offered Ford $500m in incentives, while Kentucky officials expect the company to apply for $286m in forgivable loans and skills training. And the states that lost out on Ford’s new factories are “soul searching” right now, said Brett Smith, technology director at the Center for Automotive Research, or CAR.

“Those were two very, very large investments,” he said, referring to the sites in Tennessee and Kentucky. “They’re hard to go to your boss and say, ‘Hey, we weren’t in the game.’ And there were several that weren’t in the game.”

Ford’s decision will bring to four the number of plants building electric vehicles in Tennessee. Nissan has manufactured its Leaf car there since 2017, Volkswagen plans to make the ID. 4 electric sport utility vehicle in Chattanooga and General Motors said last year it would spend $2bn to retool its Spring Hill plant for EVs.

Kristin Dziczek, the CAR’s senior vice-president of research, said that carmakers’ location calculations appeared to be “that they have land, decent costs, their workforce and their supply chain” as they decided where to build EVs.

Large, “shovel-ready” sites are important. A group of Tennessee officials from the public and private sectors began piecing together the 4,200-acre “mega site” that Ford eventually chose almost two decades ago, buying up land from 26 owners.

Lisa Drake, Ford’s chief operating officer for North America, said the company selected Tennessee and Kentucky because of their proximity to other Ford factories and suppliers, access to sustainable energy and lower construction and operating expenses, which “are very critical . . . to keep battery cell costs low”.


Electricity is a “significant” cost to manufacture EV batteries, although it is dwarfed by the cost for both labour and rare earths, said Gregory Keoleian, director of the University of Michigan’s Center for Sustainable Systems.

Electricity for industry costs 7.2 cents a kilowatt-hour in Michigan, compared to about 5.3 cents in both Kentucky and Tennessee, according to the US Energy Information Administration. The federally-owned Tennessee Valley Authority generates a majority of the state’s power using nuclear and hydro resources, a draw for carmakers wanting to cut emissions from manufacturing processes along with their products.

Industry observers note the TVA, established during the Great Depression to control flooding and electrify rural communities, has given Tennessee an edge in other ways. Several years ago authority officials began courting overseas battery makers. Now, in a state that in 2018 had fewer than one electric vehicle registration for every 1,000 people, they are helping to build a network of fast-charging stations every 50 miles along the state’s big highways.

“That just says really good things to manufacturers,” said Kim Hill, president of the consultancy HWA Analytics.

But headline-grabbing greenfield investments such as Ford’s obscure just how much companies have spent to update their longstanding Midwestern bastions for electric vehicles. CAR data show that between 2018 and 2020, carmakers invested more than $8bn in Michigan in EVs and autonomous vehicles, while Ohio received $2.5bn and Indiana $304m.

The CAR estimates that by the end of the decade the northern Midwest will manufacture a significant chunk of America’s electric vehicles with three states — Michigan, Ohio and Indiana — sending out 30 per cent of them. While the US South will produce 45 per cent of EVs, that manufacturing footprint will cover eight states.

Meanwhile, the mayor of Haywood County, Tennessee is making plans for new water and sewer lines to serve the Ford complex and the businesses and residents expected to spring up around it.

“It’s almost inconceivable to most of the locals exactly what’s going to happen,” Livingston said. “I tell them Detroit has moved to west Tennessee.”

FT : Saudi Arabia ‘serious’ about talks with Iran

Saudi Arabia ‘serious’ about talks with Iran
Kingdom says it is considering reopening Jeddah consulate as it tries to keep talks with regional foe alive

Saudi Arabia’s foreign minister has said the kingdom is “serious” about talks with Iran, signalling Riyadh’s desire to repair relations between two rivals that accuse each other of stoking tensions and instability across the Middle East.

A Saudi official added that Riyadh was considering allowing Iran to reopen its consulate in the port city of Jeddah but said the talks had not made sufficient progress to restore full diplomatic relations, something Iran has been pushing for. The kingdom has held four rounds of talks with Iran since April, including a first meeting last month with the government of new hardline president Ebrahim Raisi. The negotiations reflect a tentative de-escalation in the region in the wake of the election of US president Joe Biden and with the economic hardship wrought by the pandemic.

In a rare interview, Prince Faisal bin Farhan al-Saud, the Saudi foreign minister, told the Financial Times that the talks with Iran had been “cordial”, while describing the negotiations as “exploratory”.

“We are serious about the talks,” he said. “For us it’s not that big a shift. We’ve always said we want to find a way to stabilise the region.”

Riyadh and Tehran, which claim leadership of the Sunni and Shia Muslim worlds respectively, cut diplomatic ties in January 2016 after Saudi Arabia’s embassy in the republic was ransacked. The diplomatic mission was attacked after Saudi Arabia executed a senior Shia cleric.

Riyadh believes negotiations have not yet made sufficient progress to restore full relations with Tehran. But a Saudi official told the FT that it was considering an Iranian request for it to open its consulate in Jeddah. Riyadh was also considering allowing Tehran to reopen its representative office for the Organization of Islamic Co-operation in the port city. However, the kingdom was not yet ready to reopen a consulate in the Iranian religious city of Mashhad, with a senior official saying the dialogue so far lacked “substance”.

The discussions have been taking place amid European diplomatic efforts to broker a deal on Washington’s return to the nuclear deal Tehran signed with world powers in 2015. Talks have stalled since Raisi’s election in June.

The Saudi official added Tehran was “focused on signalling”. “Especially to the west, [they are signalling] that ‘look, we have resolved our issues with the Saudis and any lingering things we can work out together so don’t talk to us about regional security’,” he said. “‘Treat us like a normal country and let’s do this [nuclear] deal.’”

Raisi, a protégé of Iran’s supreme leader, took over this year from the centrist president Hassan Rouhani, the architect of the nuclear deal. The Saudi official said Riyadh always “had the philosophy we want to speak to the real decision makers”.

“That is why in the previous government it was pointless speaking to [Rouhani’s foreign minister Mohammad Javad] Zarif because he had no real influence on foreign policy, and really no influence on regional policy,” the official said. “So we also wanted to speak to someone close to the supreme leader.”

Tensions between Saudi Arabia and Iran soared after Riyadh backed former US president Donald Trump’s decision in 2018 to unilaterally withdraw the US from the nuclear deal with Tehran and impose crippling sanctions on the republic. The following year Iran was blamed for orchestrating a sophisticated missile and drone attack on Saudi Arabia’s oil infrastructure that temporarily knocked out half the kingdom’s crude output.

But Saudi Arabia appeared to have recalibrated its more assertive foreign policy after Biden took office pledging to reassess relations with the kingdom, criticising the murder of Jamal Khashoggi by Saudi agents and freezing some arms sales to Riyadh.

Under Crown Prince Mohammed bin Salman’s stewardship, Riyadh had aggressively pursued its war with Iranian-backed Houthi rebels in Yemen; became embroiled in a bitter diplomatic dispute with Canada; and briefly detained Saad Hariri while he was Lebanon’s prime minister. But Prince Faisal insisted that Riyadh “did not pick fights”.

“The leadership has a clear policy that the priority is prosperity, building the country, Vision 2030 [reform plan], and you can’t deliver those things with a region in turmoil,” he said. “So while we will vigorously defend our national security and our sovereignty, we will try to resolve them through diplomacy as well.”

He added that there was a “confluence of events that made it feel like it was the right moment” to talk to Iran.

“We were always willing to talk if they might actually be serious,” he said. “Various factors came into play.”

Diplomats say Riyadh wants Tehran to use its influence over the Houthi rebels in Yemen to help end the war there, with the kingdom keen to exit the conflict after intervening in 2015 to back the ousted Yemeni government.

The Associated Press reported last month that satellite imagery showed that the US had pulled its Patriot air defence system out of Saudi Arabia.

But Prince Faisal said Washington had assured the kingdom that its “commitment to our security and the security of our border is ironclad, and we take them at their word”.

“We have a robust dialogue with the Americans, we agree 90 per cent of the time,” he said. “Are we unhappy about the general tone in Washington, not the administration? We think it’s not entirely based on where the true relationship is and the value of the relationship, but it’s affected by domestic factors.”

FT : What does SoftBank see in THG?

What does SoftBank see in THG?
The UK tech sensation is struggling to explain its business

Matthew Moulding had left nothing to chance.

The 49-year-old founder of British tech sensation THG opted to pre-record his speech to shareholders from the company’s new content production facility in Manchester.

The carefully stage-managed investor event was designed to draw back the curtain on “Ingenuity”, THG’s star subsidiary and the rationale for investment from Japan’s SoftBank.

But first Moulding had a message for the doubters.

“We are clearly aware of the short attack that was initiated against THG in the past 10 days, centring around the capabilities of our Ingenuity platform,” he explained, referencing a recent scathing analyst note.

“It’s fortuitous, therefore, that we have the opportunity today . . . to set the record straight on any claims made.”

Then the share price started falling.

By the time the glossy presentation on the “genius of Ingenuity” wrapped up, THG’s share price was down 5 per cent. As the event shifted to live questions, it tumbled a further 10 per cent. After Moulding and his business partners finished the call, the stock went into free fall, ending the day down more than a third, wiping a cool £1.85bn from the market value of the business formerly known as The Hut Group.

One City adviser called the question and answer session “shambolic”. Another despaired at Moulding’s broadside against short sellers: “Even if you think it, you shouldn’t say it.”

For the London stock market, THG’s share price crash was another embarrassment in a year of tech-related fiascos, from Deliveroo’s disastrous March IPO to the recent 50 per cent fall in Alphawave’s shares.

But the crisis of confidence has also left analysts and investors asking more fundamental questions about the cash-burning purveyor of beauty products and protein shakes that raised £1.9bn in a marquee IPO just over a year ago.


Social media influencing platform
When tech consultant Alan Wilson and former lawyer Niki Tibble launched carbon offsetting start-up MoreTrees in November 2020, they probably did not expect the business to be the target of a multimillion-pound buyout five months later.

Yet in April THG did exactly that, paying £500,000 upfront and £4m in deferred consideration as part of its strategy to “drive scale into a hugely important sustainability action”.

While THG is best known for selling lipstick and protein powder to image-conscious consumers, its breakneck run of acquisitions has also included a string of esoteric smaller businesses, such as a Preston-based plastics recycling company.

These deals cut to a question that has dogged THG throughout its 17-year history: what exactly does the company do?

At the core of the company is Lookfantastic, the centrepiece of a direct-to-consumer beauty retail business, and a nutrition business, focused on the MyProtein brand bought for about £60m in 2011. Sales in the nutrition business have since grown by an average annual growth rate of 43 per cent, success the company puts down to its Ingenuity system.

But the two segments, which accounted for nearly 80 per cent of group revenues in the first half of the year, are relatively low-valued ecommerce businesses.

It has always been Ingenuity — once described by Moulding as a “social media influencer platform” — which has excited and confused investors in equal measure.

Largely assembled through acquisitions of businesses from web hosting to translation services, Ingenuity offers other brands access to THG’s technology platform and logistics capabilities. It accounted for about 9 per cent of first-half sales. But Ingenuity Commerce, the part offering an end-to-end ecommerce solution to third-party clients, accounted for 2 per cent, or £18.3m.

One disappointment this week, according to some analysts, was that the presentation did not include details of work with Ingenuity’s larger clients, such as Nestlé, or big new customer wins. Instead, there was an interview with the co-founder of Revolution Beauty, the £387m make-up brand that recently listed in London, and which Moulding has invested in, according to reports.

“A lot of clients don’t like being talked about,” said one person close to the company, arguing that the presentation was always intended to be an explanatory session and not to provide new figures, such as divisional profit margins.


Time is on SoftBank’s side
THG’s challenge is living up to the expectations set for Ingenuity in May, after Japanese technology investor SoftBank acquired an option to invest in an Ingenuity subsidiary.

The complex deal allowed 15 months for THG to spin off the Ingenuity unit and SoftBank to decide whether to buy a 19.9% stake for $1.6bn. But Moulding in May told investors he anticipated this “going through in six months’ time”. This week, management said the deal should close in the first half of 2022.

SoftBank has no obligation to complete the deal at all and the current share price is not encouraging. The price agreed with SoftBank reflects an enterprise value for Ingenuity of £4.5bn, about £1bn higher than the current market capitalisation of its parent company.

“We have the benefit of time to decide on whether to exercise [the option] or not,” a SoftBank executive told the FT. “I don’t know why analysts are assuming anything about the option being mandatory. It never was.”

SoftBank’s investment — which is now deeply underwater following the share price slide — was spearheaded by Akshay Naheta, a former Deutsche Bank trader who masterminded the Japanese group’s intricate $1bn bet on the technology company Wirecard before its collapse in a fraud scandal.

Alongside the financial investment, THG last month announced that nine SoftBank-backed companies were “partnering” with Ingenuity. It has announced that warehouse robotics group AutoStore is powering a new automated “retrieval solution” in Manchester, for example.

However, AutoStore, which is in the process of listing on the Oslo Stock Exchange, describes THG as a “customer” and a person close to the matter said all material partners were described as such in the IPO prospectus.

Moulding an entrepreneur
Moulding is an apt figurehead for a business that has forged close ties with Instagram influencers, generating attention for his shirtless social media posts and jet set lifestyle.

But those who know him describe a talented and hard-working entrepreneur. “What I see in Matt is quite rare,” said Sir Tom Hunter, the retail and property investor, who was one of Moulding’s early backers and remains an investor. “He can see the strategy piece . . . but the execution of how he gets there is amazing as well. Not many have got both.”

Speaking to the FT in 2010, the then 38-year-old Moulding outlined how a hard upbringing in the north-west of England had influenced his approach to life and business.

“You soon realise the value of money when your dad’s gone out for a day’s work and made nothing because the weather’s bad,” he said, in reference to his father’s work as an itinerant labourer resurfacing driveways.

Then known simply as The Hut, the company originally made its money selling CDs and DVDs online for other retailers, avoiding UK sales tax by basing its distribution operation in the Channel Islands.

Back in 2010, the six-year-old company had just achieved a valuation of £32m after winning investment from Balderton Capital, an early triumph that was intended to pave the way for an IPO the following year.

But in preparation for listing, new auditors PwC realised it had been provided with a falsified document during its audit — scuppering the planned listing.

Independent research firm The Analyst highlighted the incident in a sceptical assessment of THG’s business published earlier this month that drew Moulding’s ire on the investor call.

Mark Hiley, the firm’s managing partner and founder, told the FT that Moulding’s description of his firm’s research note was “inappropriate”.

“At its core, we just thought The Hut Group was overvalued,” he said. “How that is a ‘short attack’ is beyond me and it was unfortunate that management chose to use that line.”

Switzerland’s PSquared Asset Management is the only disclosed short seller betting against the company’s stock, with a position equivalent to 0.7 per cent of the shares. This puts THG outside of the top 50 most-shorted companies on the London stock market.

Searching for answers
“It has not been a great day, that’s for sure,” Moulding admitted after the presentation. But the company’s founder was at loss to explain the share price crash

“I don’t know the full answers to that,” he told the Daily Mail on Tuesday. “I’ll be on that with the banks very shortly.”

THG’s corporate brokers Barclays, Citigroup and Jefferies all declined to comment to the FT.

Moulding’s ties to some of them run deep. Barclays stood by his nascent business during the 2011 revelations of fraud, agreeing to waive a banking covenant that would have been breached. Citigroup’s Philip Drury, the US bank’s global head of tech banking, once shared a London flat with the then young entrepreneur in the 1990s. Drury declined to comment on his relationship with Moulding, describing the FT’s inquiry as “entirely inappropriate”.

THG’s best course now is to press ahead with its strategy which remains unchanged, say people close to the group, and prove that the market is now undervaluing the Ingenuity business.

One other option under consideration to start the process of winning back the trust of investors is to strengthen the company’s board, said one person familiar with the matter, who said Moulding could even relinquish his role as chair, which he holds in addition to his position as chief executive, in contravention of City best practice.

While praising THG’s “phenomenal tech”, the SoftBank executive conceded that there needed to be “governance changes”.

Others are less convinced the company can be reformed. One former longstanding shareholder said he disposed of his stake having grown concerned around the group’s opacity and governance issues.

“Since the days of old, men have been telling people they can turn lead into gold,” he said. “They can’t.”

>>> US Close Dow +1.56% S&P +1.71% Nasdaq +1.73% Russell +1.44%

Closing Stock Market Summary

The S&P 500 rallied 1.7% on Thursday, bolstered by positive earnings news, relatively encouraging economic data, and a decline in long-term interest rates. The Nasdaq Composite (+1.7%) and Dow Jones Industrial Average (+1.6%) performed comparably to the benchmark index, while Russell 2000 increased 1.4%. 

The advance was steady and broad-based: all 11 S&P 500 sectors closed higher between 1.0% (consumer discretionary) and 2.4% (materials), and the Invesco S&P 500 Equal Weight ETF (RSP 155.17, +2.62) gained 1.7%. Notably, the S&P 500 reclaimed its 50-day moving average (4436) on a closing basis.

Growth stocks particularly benefited from the 10-yr yield declining by three basis points to 1.52%, which was driven by a peak-inflation sentiment following the Producer Price Index (PPI) report for September. While the year-over-year rates for PPI remained notably high, core PPI, which excludes food and energy, increased just 0.2% m/m (Briefing.com consensus +0.5%).

Value stocks drew support from better-than-expected Q3 earnings reports and from the lowest level of weekly jobless claims since the start of the pandemic. Initial jobless claims decreased by 36,000 to 293,000 (Briefing.com consensus 332,000).

The high-profile earnings winners included UnitedHealth (UNH 420.36, +16.81, +4.2%), Bank of America (BAC 45.07, +1.93, +4.5%), Morgan Stanley (MS 101.01, +2.44, +2.5%), Walgreens Boots Alliance (WBA 50.77, +3.51, +7.4%), Citigroup (C 70.80, +0.54, +0.8%), and Taiwan Semi (TSM 112.56, +2.58, +2.4%). 

Taiwan Semi also provided upside Q4 revenue guidance, which served as an additional boost for the Philadelphia Semiconductor Index (+3.1%). Wells Fargo (WFC 45.31, -0.74, -1.6%) and U.S. Bancorp (USB 60.08, -1.38, -2.3%), however, struggled with losses despite beating expectations. 

Separately, an FDA advisory committee unanimously recommended Moderna's (MRNA 331.88, +10.38, +3.2%) booster shot for adults 65 years and older and other high-risk adults. 

The 2-yr yield decreased two basis points to 0.35%. The U.S. Dollar Index decreased 0.1% to 93.99. WTI crude futures rose 1.0%, or $0.77, to $81.28/bbl despite a sizable build in weekly crude inventories (6.09 mln barrels).

Reviewing Thursday's economic data:

  • The Producer Price Index for September was a bit softer than expected. The index for final demand increased 0.5% month-over-month (consensus +0.6%) and the index for final demand, less foods and energy, increased 0.2% (consensus +0.5%). On a year-over-year basis, the index for final demand was up 8.6%, versus 8.3% in August. That is the largest advance since the 12-month data were first calculated in November 2010.
    • The key takeaway from the report is in the Treasury market's initial response, which is muted and indicative once again that market participants are sniffing peak inflation. The 10-yr note yield is down two basis points to 1.53% (which is where it was just prior to the release).
  • The latest weekly initial claims report was the best since March 14, 2020. Initial claims for the week ending October 9 decreased by 36,000 to 293,000 (Briefing.com consensus 332,000). Continuing claims for the week ending October 2 decreased by 134,000 to 2.593 million, which was also the lowest since March 14, 2020.
    • The key takeaway from the report is that the claims figures are moving in the manner and direction they should be moving given the recurring refrain of labor shortages and the recurring reports showing that there are more than ten million job openings.

Looking ahead to Friday, investors will receive Retail Sales for September, the Empire State Manufacturing Survey for October, Import and Export Prices for September, the preliminary University of Michigan Index of Consumer Sentiment for October, and Business Inventories for August. 

  • S&P 500 +18.2% YTD
  • Russell 2000 +15.1% YTD
  • Nasdaq Composite +15.0% YTD
  • Dow Jones Industrial Average +14.1% YTD

>>> US After Hours Summary: AA jumps +5.5% on earnings and dividend initiation;

After Hours Summary: AA jumps +5.5% on earnings and dividend initiation; MRNA +0.5% confirms FDA panel news on boosters; DCT -13.5% falls on weak guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: AA +5.5% (also initiates dividend; announces $500 mln share repurchase program), WAFD +4.5%

Companies trading higher in after hours in reaction to news: ME +10.7% (positive mention on CNBC), TRQ +3.7% (announces Q3 production update; provides Oyu Tolgoi mine update), FUBO +2.9% (announces partnership with NASCAR), STLD +2.1% (to acquire minority interest in New Process Steel), BIIB +1.7% (data from Tofersen phase 3 study to be presented at the ANA meeting), SCR +1.5% (SCR receives court approval to be acquired by PENN), IONS +1.5% (in sympathy with BIIB news), OPEN +1.5% (positive mention on CNBC), HOLX +0.9% (to acquire Bolder Surgical for $160 mln), SXT +0.6% (increases dividend), ODC +0.5% (to raise prices of cat litter products), MRNA +0.5% (confirms that FDA Advisory Committee unanimously votes in support of emergency use for a booster dose), JNJ +0.5% (creates $2 bln trust to facilitate talc claims), HWM +0.4% (Co-CEO John Plant to assume the position of sole CEO), PENN +0.2% (SCR receives court approval to be acquired by PENN), NWN +0.2% (increases dividend), GLDD +0.1% (announces recent dredging awards totaling $88.1 mln), AAPL +0.1% (hires new engineer for its HomePod smart speaker, according to Bloomberg), GOOG +0.1% (introduces continuous scrolling on mobile devices)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: DCT -13.5%, CRSR -6.8% (issues downside Q3 and FY21 rev guidance due to supply chain issues), TACO -2.9%

Companies trading lower in after hours in reaction to news: SPCE -13.5% (begins vehicle enhancement and modification period), ML -2.9% (stock offering), WTI -2.4% (files for $500 mln mixed securities shelf offering), CHPT -2.1% (stock offering), RIO -2% (lowers Q3 production targets for iron ore, copper), BTCM -1.2% (BTC.com to exit China), ANGI -1% (names former Twitter exec as its first Chief Data Officer), AMN -0.9% (names new CFO)