Tesla Builds Cheapest Model Ever & Are Unions Dying?

0:00This episode is brought to you by State Farm. Checking off the boxes on your to do list is a great feeling. And when it comes to checking off coverage, a State Farm agent can help you choose an option that's right for you. Whether you prefer talking in person, on the phone, or using the award-winning app, it's nice knowing you have help finding coverage that best fits your needs. Like a good neighbor, State Farm is there.

0:26Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, Tesla just got rear-ended in its earnings report. We're going to take it to the shop and inspect the damage. Then remember SPAC mania, the SEC does, and it's doing its best to make sure it never happens again. It's Thursday, January 25th. Let's ride.

0:51This certainly got everyone talking yesterday. Jon Stewart is returning to The Daily Show on Comedy Central. As host from 1999 to 2015, Stewart turned the show into this comedic and political force that no one has been able to replicate since. So why come back, John? Well, the new gig seems pretty cushy. Stewart will serve as executive producer and only sit in the host chair once a week on Mondays. Toby, do you think Stewart can make this show relevant again, or is late night just a dead medium? I mean, I think Comedy Central is certainly happy to have him back because in the last season of Trevor Noah's stint, viewership was down 70 % from the peak John Stewart era.

1:31I do think the biggest difference between 2015, which is his last year of hosting, and now is the fact that TikTok exists now. So I do think that there is sort of this viral cycle that will boost some of these clips even further than his viral clips from the days gone by. So I do think it's relevant. It's an election year. Jon Stewart's kind of uniquely good at navigating the insanity of these political moments. So I think that it's still relevant. But specifically on social media, like we should expect Jon Stewart to, you know, his when he hosts Monday night, we expect him to be all over TikTok on Tuesday.

2:06Very similar to what happens with SNL now, Saturday nights. You know, I don't know how many people actually watch on Saturday night, but you bet people are watching on YouTube on Sunday. Same with John Oliver's rants on HBO. They come on actually live Sunday night and then no one kind of sees them till the next day. Maybe that'll happen with Stewart. but I expect it to be a little more limited effect if he's only hosting once a week. That TikTok, though, it will send it viral. Before we jump into the show today, we have a quick word from our sponsor, Veeam. Neil, I was playing Scrabble yesterday, and I looked into my hand and saw a V, two Es, an M, and an open A to play off of.

2:44Veeam was staring me right in the face. Did you play it? You bet your buttocks I did. Now, my opponent wasn't happy, but once I told them that Veeam believes in radical resilience, which is all about being able to take data disruptions in stride and recover quickly. They were more accommodating. Probably like a 20-point word, too. Actually, 40. I snagged that double word score. Head to veeam.com today to discover more. That's V-E-E-A-M.com today. Race the rudders! Race the sails! Race the sails! Captain, an unidentified ship is approaching. Over. Roger. Wait, is that an enterprise sails solution?

3:19Reach sails professionals, not professional sailors. With LinkedIn ads, you can target the right people by industry, job title, and more. Start converting your B2B audience today. Spend$250 on your first campaign and get a free$250 credit for the next one. Get started today at linkedin.com slash campaign. Terms and conditions apply. Let's dive into some Tesla earnings where everyone's favorite auto slash AI slash robotics slash energy company kind of disappointed across the board. Top line revenue more or less met expectations coming in at 21. $25.17 billion versus$25.87 billion expected. But in a decidedly un-Tesla move, it warned of, quote, notably slower growth in 2024.

4:04Costs related to ramping up Cybertruck production, along with increased expenses for AI projects, combined with the recent price cuts, also dented profitability. That said, it's Tesla, so there's always a bright side. First, Tesla reported earlier this month that it delivered 484 ,000 cars in Q4, beating estimates and setting an all-time record. But the biggest bright spot for Tesla fans is there's a new next-gen affordable car in the works, codenamed Redwood, set to begin production in 2025. Elon first teased plans for a 25 ,000 EV all the way back in 2020, but now it looks like there's a timeline in place for what would be Tesla's cheapest mass market car ever.

4:46Tesla is always so polarizing around earnings seasons, depending on your view of the company. How's the future looking for it right now, Neil? You have a way rosier take than I think I do and investors do. The stock is down nearly 8 % this morning. This is a company that has ran into Holland Tunnel level traffic. It's slowing down very considerably, facing the broader decline in demand for EVs in general. There's hyper competition from China and BYD with their$25 ,000 cars. It hasn't really released any new compelling products for the mass market recently besides the Cybertruck. Not many people are going to buy that.

5:21And investors are seriously worried, not only about the carmaker's growth, but also Elon Musk's leadership and his commitment to Tesla. Yeah, the whole vibe around Tesla right now is different. The mood is different. I mean, it expected a 21 % rise in 2024 deliveries, which was well below their annual target of 50 % that must set just three years ago. So it just goes to show how different of a landscape we're currently in. And then also, remember, profit margins have always been Tesla's kind of knight in shining armor. They've always been able to lap the field when it comes to how profitable they are in terms of compared to legacy automakers.

6:01But profit margins did go up slightly to 8.2%, up from 7.6 % the previous quarter. But if we go back to last year, it was at 16%. So it just goes to show, again, with those price cuts that they've been doing, that their once unassailable profit margin is kind of shrinking right now. This is the stat that kind of made my jaw drop about those price cuts and its shrinking margins. Tesla sold 35 % more cars in 2023 than in 2022. its overall sales rose 1 % over that time span. So it's selling a lot more cars, but it basically lost its pricing power in this race to the bottom with this hyper-competitive EV market.

6:42Yeah, and I mean, you mentioned kind of some of the rumblings around Elon Musk's commitment to the company, because he said last week that he wanted more control of the company, or else he might take his toys and go play elsewhere if he didn't get 25 % control of the company, specifically related to some of the AI projects they're carrying out. So there's always like you're always kind of riding the Elon wave depending on his moods and depending on what he thinks going forward. So, yeah, there's definitely some crack showing in Tesla's facade right now. Moving on. Detroit is the place to be these days.

7:11Not only are the Lions playing in the NFC championship game, but the United Auto Workers Union is trying to play kinmaker in the upcoming presidential election. Yesterday, President Sean Fain announced that the influential union, composed of 400 ,000 workers, would endorse Joe Biden for re-election in a joint appearance with the president. While this wasn't a surprise, since unions typically do endorse Democratic candidates, Fain did repeat the type of hardball tactics we witnessed during the UAW strikes last year. Last year, he said that Biden's endorsement wouldn't be freely given like it had been in the past, and that Biden had to earn it by showing commitment to unionized auto workers.

7:50Biden understood the assignment and headed up to Michigan in the fall to become the first sitting president in history to join the picket line with the UAW. Biden has billed himself as the most pro-union president ever. And yesterday he told the union, I'm honored to have your back and you have mine. That's the deal. And for Biden, that's a good deal because the states home to the most UAW members, Michigan, Wisconsin and Pennsylvania, are the battleground states that could determine the election in 2024. Yeah, just as a numbers game, the union vote is a pretty big prize. There's 400 ,000 active members, 600 ,000 retired members.

8:25So that's a million voters right there. And again, the union doesn't vote completely as a monolith. There is obviously individual people in there. But just as a numbers game, it is nice to secure that vote kind of heading into this election cycle. Yeah, so if we actually do want to break down the union vote, they've done internal polling. It seems that they've reported that 30 percent are typically vote for Democrats, 30 percent are Republicans and 30 percent are swing voters. But when it comes down to the election and actual voting, those 30 percent can't decide to Democrats. So in the past few years, Trump has gotten about 30 percent of the union vote.

9:02There are definitely some cracks, though, when it comes to the union supporting Biden's kind of agenda, because, remember, Biden's electric vehicle transition was a big issue for the union vote for Sean Fain, because they think that it will threaten some of their job security. So, it's been interesting, because the UAW has tried to push back and prevent the president from issuing some of those EV grants that prioritize companies offering higher pay and stuff like that. So, it is interesting to see that, even though they supported it, there are some kind of pushback within the union itself. Yeah, it's been a little bit of a rocky relationship because Biden's Inflation Reduction Act, according to the UAW, didn't go far enough to dangle incentives for companies to hire unionized workers.

9:47And they are very worried about the transition to electric vehicles because electric vehicles, when you make them, they require a lot fewer parts, a lot fewer people. So it requires 30 percent less labor than internal combustion engines. So you can see why there's been a rocky relationship here, because the UAW wants their most important thing is to protect union jobs. And the transition to EVs and also our reliance on foreign countries for EV parts threatens to disrupt that equilibrium a little bit. Just to zoom out a little bit to see where unions are in the country right now, it is interesting because union membership is at record low rates, even though the sheer number of workers in unions increase.

10:30But the workers of non-union companies actually increased at a faster rate, so the percentage went down. But support for unions are at a record high. A recent Gallup poll put it at 67 % of the general population was supportive of unions, which is high from the record lows of during the Great Recession. So it is interesting that unions are both falling in relevance, but also gaining in popularity, just as to provide some context of where unions are right now. All right, let's move on. This next story details the saga of a baby clothes manufacturer swept up by an internet maelstrom of mishandled parental leave, insincere apologies, and online outrage.

11:10So there's this company called Kite Baby that is known by lots of younger parents in cells, sleepwear for babies. We're talking$75 sleep bags,$48 infant jogger sets. You get the picture. But the outrage started when word got out that the company had declined a new parent's request to work remotely while her adopted son was in the neonatal intensive care unit. Sarah Green Carmichael, an opinion columnist for Bloomberg, likened it to Patagonia getting caught chopping down a redwood tree. It's just antithetical to the entire brand. Then the outrage cycle continued after Kite Baby's founder and CEO issued what many took to be an insincere apology where she was clearly reading off a piece of paper.

11:52She then issued another apology for the previous apology, but the damage was done. Neil, I think the reason this has struck such a nerve with people and why we're talking about it today is that it combines so many elements of modern American culture, the lack of parental leave for new parents, inflexible working arrangements, social media outrage cycles, brands being insincere. It is a perfect storm. It is a perfect storm. This company stepped in so many piles of bird doo-doo. It's hard to know which one to pick at first. Let's first talk about the apology. Whenever you say that there were two apologies, you put apology plural.

12:29You know that the company has a PR disaster. If you consulted a single PR professional, you would say not to post an apology to TikTok because when you put yourself out on TikTok, you're just asking for reactions and for this to go viral. I don't know what a better platform would be. Maybe LinkedIn has a little less virality, But the fact is this company lived and died by social media. They were so big on Instagram and TikTok. And that was the reason for their success largely. And so I think they also thought that they could quell the growing criticism also on social media. But this has led to actually significant boycotts because you have moms filming themselves taking kite baby products and literally tossing them out in the snow.

13:14So this could have actually material impacts on their business. Oh, absolutely. And if you look at the comments under these videos, which I did, it's just people selling other brands that provide alternative to Hype Babies products. But I also do want to talk about kind of the hot button issue around corporate inflexibility, around remote work requests. I mean, remember, during the pandemic, many working moms kind of got a ton of jobs piled on them. Like you had their actual paying job and you have to take care of the kids. You have to educate the kids as well. And then as we kind of emerged from the pandemic, remote work was this blessing in disguise.

13:47Once their kids went back to school, they finally had the flexibility they've been fighting for for so long. And yet here we are again having this conversation about companies not being accommodating to new moms in flexible work arrangements. Especially a baby company. Right. Again, and then that touches on the last issue, which is brands being insincere. corporate consumers right now are very astute and very adept and they can see through if a brand is actually walking the walk or if they're just talking the talk and this is just a perfect example of a brand that completely messed up the walk and walking and the talking for the final point i have a question for you what do the marshall islands micronesia nauru palau papua new guinea tonga and the united states have in common i got nothing they are the only six countries in the world without a form of national paid leave.

14:36Oh, interesting. So our paid leave policies are very minimal, bare bones paid leave policies. Definitely also in the spotlight with this particular company. I mean, they only offered two weeks of maternal paid leave if you weren't an employee for 12 months or more. And there's no national law. So Texas, where this company is based, kind of leaves it up to employers. I think only a quarter of all U.S. private employers offer some sort of paid leave. So that also kind of raised people's ire as to the fact that we're only one of six countries in the entire world without this type of policy. Yeah, truly ridiculous.

15:15All right, before we jump into the next part of our show, we're going to take a quick break.

15:21Tonight on NBC, Jimmy Fallon and Bozema St. John host the highly anticipated new competition show. I hired 10 creatives from all walks of life. They will be battling it out to see who can impress the world's biggest brands. This is a huge opportunity. This is the battle for the next big idea. This is not play play. We're spending millions of dollars. I'm so excited to embark on this adventure with all of you. Make the best idea win! On brand with Jimmy Fallon. Series premiere tonight on NBC. I'm Christian McCaffrey, pro running back. And Abercrombie is an official fashion partner of the NFL. I'm not kidding when I say NFL by Abercrombie broke the internet last year, and I think this season's lineup is even cooler.

16:02And so does my wife, who keeps stealing all my hoodies. Stay fit for the season and Abercrombie's newest arrivals. Shop NFL by Abercrombie in the app, online, and in store.

16:21Welcome to Neal's Numbers, the segment where I share three stats from the week's news that will give you full body goosebumps. First up, how many 123 year olds do you know? The answer should be zero since the oldest human lived 122, but apparently more than 2200 companies in the world have board directors aged 123 years and above. One listed director was 942 years old, which means they were born in the 11th century. That guy is always complaining about Gen Z. These shocking findings come from a Moody's investigation into shell companies that expose how their complex structure and secrecy could facilitate financial crimes.

17:02And it's not just medieval people filling board seats that raised red flags. Thousands of companies had directors below five years old. One China-based textile and clothing manufacturer reported$2 billion in annual revenue despite having one employee. 22 ,000 entries had a registered address at the Egyptian pyramids. And one individual had 5 ,700 roles at 2 ,800 different entities. Shell companies, totally not sketchy at all. Yeah, this is one of my favorite reports ever. Every single nugget just got better than the last. I truly do love the textile company that said, we got$2 million in revenue with only a single employee.

17:41It is interesting, though, because shell companies do have their place. They have a reason for existing. but also it's also just famously used for lots of corporate fraud. And this is just the tip of the iceberg because this is just one report. So, shell companies, man. I mean, 47 – and it's not kind of like evenly distributed over the course of the – over the world. When you look at Panama, 47 % of companies in Panama raised red flags in this Moody's report. Then the Panama Papers come out, and I think they cleaned up their act a little bit. But it is it is kind of an interesting look at this murky world that's able to facilitate financial crimes.

18:15I think one point nine trillion dollars is laundered each year. OK, my second number is one, which is how many liquor stores there will soon be in Saudi Arabia. The kingdom, a conservative Muslim theocracy, had banned alcohol since 1952. But in the next few weeks, it's planning to open its first liquor store in the capital, Riyadh, another sign. It's loosening strict religious rules to attract foreign investors and tourists. This won't be a free-for-all like Town Hall Liquors in College Park. The store is only open to non-Muslim diplomats. No people under the age of 21 are allowed in. And in true comedy seller fashion, you can't take pictures or have your phone out.

18:52It's a baby step for sure, but it does fit a pattern of Saudi Arabia entering this new chapter of secularization, including reversing a ban on women driving and allowing public entertainment, music, and mixing of genders. This is, in a word, symbolic. Yeah, it's definitely symbolic. And there's been this tension of how do you modernize a country that has typically been governed by kind of a lot of religious laws. It is interesting going back to the history of when alcohol was banned, though. Liquor was banned across the country after an intoxicated Saudi prince shot a British diplomat in the 1950s following a party.

19:28So you can see why they kind of dropped the hammer back then. We'll see if something similar happens in this kind of new era. Right, but they need to diversify their economy away from oil, and they're spending$500 billion on this new megacity called Neom. And there's been rumors that they're going to sell wine, beer, and cocktails there. And I guess alcohol is kind of table stakes if you want to attract foreign investors because you have all these soccer players coming in. You have entertainment moguls and tech, and they like to have a cocktail after work. Well, it's also like alcohol historically throughout all of human history has been a way to kind of bond and create community.

20:05And so even though in, of course, in moderation, but that is something if you're trying to build a civilization, if you look back through history, alcohol is usually plays a role. Well, specifically business deals. Right. That too. All right. So my last number was about a historic first for a store opening. My final number is about a historic first for a store closing. Burger Chain In-N-Out is closing its store in Oakland, California, marking the first time in the company's 75-year history that it will shut down a location. The reason? Crime in the local area. The company said that its customers and staff members are regularly victimized by car break-ins, property damage, theft, and armed robberies.

20:44And so while this location was still profitable, In-N-Out said it wasn't safe to continue operating it. Of course, this brings to mind many other retailers that have closed up shop across the country. citing a surge in crime. Several reports, though, have cast doubt on those motivations, particularly at Target. They produce data that shows level of crime was not worse near those store locations compared to others in the same city. Still, at least in Oakland, violent crimes were up 21 % and robberies rose 37 % last year. Right. It is kind of an area thing because nationally, violent crime fell to 8.2 % in 2023 after a rise in 2021.

21:22But as you said, in Oakland, it's at 21%. So there is just a lot of crime in this area. You don't often see a brand specifically point to crime because when Target closed those scores and did it, people kind of pushed back against it. But In-N-Out did not mince words here at all. They said, it is crime. Our employees feel unsafe and we just can't operate anymore, even though the store is profitable. Okay, thank you for those numbers, Neil. It's time to move on, though. So I know some of you listening to the show might have only started paying attention to business news more recently, and if so, might have missed out on the SPAC mania of 2020 and 2021, it was a wild time, let me tell you.

22:02SPACs, aka special purpose acquisition companies, are essentially shell companies that list themselves on the stock market for the sole purpose of merging with a private company to take it public. It's sort of a corporate sleight of hand that allows companies to sell stock to investors with a lot less of the typical disclosures that come along with a more traditional IPO. That always rubbed the SEC the wrong way. And yesterday, the commission voted to adopt rules to require additional disclosures around the SPAC process in order to protect consumers from getting a raw deal. Uncertainty around these impending regulations definitely popped the SPAC bubble.

22:41More than 860 SPACs raised$246 billion in 2020 and 2021. but last year saw just 31 SPACs raise just$3.8 billion. Neil, the headlines yesterday were reading that this is the end of SPAC mania. Is this the end and is it a justified end? This, when you read into how the mechanisms of SPACs work, you wonder how it was ever legal. I mean, they've been around for decades and had not really been used as a way to go public, but they boomed during the really low interest rate environments of 2020 and 2021, very much in line with the crypto boom and the meme stock mania of GameStop AMC we saw during the same time.

23:21The main problem with SPACs is that they're so tilted in favor of the people who create them. They have such more profit-making ability. They don't really have to put that much skin in the game, and it's tilted all the way against the regular investor. So you see people like Chamath, who's this billionaire venture capitalist. He was kind of the symbol of the the SPAC boom. His SPACs failed. Most of his SPACs were so bad. They had Virgin Galactic, a bunch of other ones that have fell so much in value recently. But he still made$750 million from SPACs. Meanwhile, regular investors are left holding the bag.

24:00Yeah. The problem is the incentive structure because it's very favorable terms for, like you said, their creators known as sponsors. They get to put up a small amount of money to cover the expenses, but then they get the option of getting a 20 % stake at really, really big discounts. Meanwhile, it's just not a very efficient way of going public because once you subtract the banker's fees, the sponsor's cut, the lawyer's fees, early investor's fees, the SPAC might only have 50 cents for every dollar invested. So again, remember the purpose of going public is to raise money for a company to use.