Can an insider succeed at changing Wells Fargo’s culture?
That’s the question hanging over new CEO Tim Sloan, a 29-year veteran of the company who previously served as COO and CFO. Sloan paid a visit to Fortune yesterday, in the early stages of his campaign to rebuild the badly battered reputation of the bank. He said he received the same advice from a number of business mentors before taking the job: “You’ve got to make sure you are ready for it, because it is not going to be easy.”
That may be an understatement. The bank is hemorrhaging customers, and Washington is out for blood. Hillary Clinton said Wells Fargo is part of the “rigged system” that is crushing the middle class; Elizabeth Warren wants Sloan to answer: what did he know, and when did he know it?
In a speech to his employees two days ago, Sloan reviewed steps the company is taking to address the problem, but acknowledged the scandal won’t end quickly. “This work to restore trust in Wells Fargo is going to play out over a long period of time – weeks, months, maybe years. So let’s be patient and strong. Let’s demonstrate perseverance.”
In addition to perseverance, the company also is engaging independent “culture experts” to “help us understand where we have cultural weaknesses that need to be strengthened or fixed. We know we don’t have all the answers and want to have the courage to learn from others.”
I suggested Sloan reach out to GM CEO Mary Barra, another company lifer who faced an ignition scandal when she became CEO, and rejected the advice of colleagues who told her to persevere until the company got over it. I don’t want to get over it, she replied. “I don’t want to set it aside and explain it,” she said to Fortune’s Geoff Colvin in 2014, “because I think it has uncovered some things in our company that it’s critical we challenge ourselves to change and to fix.”
More news below.
• Tesla Swings to a Surprise Profit
Tesla Motors posted a surprise profit of $21.9 million in the third quarter, defying Wall Street expectations for another chunky loss. The results, which were underpinned by a more-than-respectable widening of gross margins to 27.7% from 21.6%, are an important morale boost for the company as it prepares for some big cash-flow challenges as it shifts its business model to mass production with the new Model 3. It had lost nearly $900 million over the previous three quarters. In a conference call, Elon Musk repeated yesterday he wants the Model 3 to hit the market by end of next year. Musk yesterday also fleshed out his ideas for a car-sharing service that will allow owners to defray the cost of ownership by renting their cars out when they’re not using them. The shares rose 4% after the bell to a three-week high. They’re still down 12% for the year, though. Fortune
• Heck, Even Deutsche Does Too
Deutsche Bank swung to a surprise profit of 278 million euros, benefiting from the broad improvement in bond market conditions that also helped Wall Street’s biggest institutions. However, the bank only set aside another 400 million euros for litigation risks, bringing its total kitty to 5.9 billion euros–well short of the final bill it could face for mortgage security mis-selling, inadequate trusteeship and alleged money-laundering for Russian clients. The bank said clients had withdrawn 9 billion euros in the quarter from its wealth management business on concerns about its balance sheet, and said that liquidity reserves had fallen from 223 billion euros to 200 billion. “We have to assume that the situation will stay difficult for a while,” CEO John Cryan said. Fortune
• ZTO Nets $1.4 Billion. Now for the Spending Spree
Chinese logistics firm ZTO Express completed its initial public offering, the biggest of 2016 on the New York Stock Exchange, raising $1.4 billion in a deal that valued it at over $12 billion. The company will spend over half of the proceeds on land, facilities, equipment and trucks as it uses IPO to get a head start on rivals in the world’s largest e-commerce market. The IPO priced the shares at 27 times expected earnings, according to analysts. That compares to 18 and 13 times earnings for UPS and FedEx. As with many other Chinese IPOs in New York, U.S. investors are only along for the ride. Founder Lai Mesong will continue to have 80% of the company’s voting stock. Fortune
• If You Can’t GE With the One You Love…
General Electric’s pursuit of 3D printing expertise took a turn lifted from a Jane Austen novel. After its offer for SLM Solutions AG was spurned by Elliott Capital Management, the German company’s largest shareholder, GE promptly transferred its affections to a privately-held German rival, Concept Laser, which serves mainly the aerospace, medical and dental sectors. It will pay $600 million for 75% of the company and an option on the remaining 25%. SLM was one of two Elliott-backed companies GE announced bids for last month. For the other, Swedish-based Arcam, GE raised its offer yesterday. 3D printing, also known as additive manufacturing, produces parts with less work than traditional production methods, generates less scrap material and expands design possibilities. Fortune
Around the Water Cooler
• Mistry Revenges Himself on Tata
Cyrus Mistry launched a bitter attack on Tata Group after his sudden ouster as chairman of Tata Sons, the Indian conglomerate’s main holding company. Mistry said that five of the group’s investments need to be written down by a combined $18 billion, and accused the group of “aggressive accounting” and even fraudulent payments. The group’s U.K.-based steel and chemical operations are both challenged, while its Indian telecoms business is “continuously haemorrhaging,” and its Indian power and small car ventures (Tata Nan) are both in trouble. Mistry also muttered dark words about Tata’s joint venture with AirAsia, the continent’s biggest discount airline. FT, metered access
• Brexit Effect? What Brexit Effect?
How long can the U.K.’s short-term indicators exceed expectations? The fact is that they continue to do so with some regularity. GDP in the third quarter rose 0.5%, clearly above consensus forecasts for 0.3%, leaving the annual growth rate up 2.3%, comfortably ahead of its major rivals in the Eurozone. The stock response from London-based commentators is that it can’t last: uncertainty over future trading and migration relations with the EU must some day cripple investment and cause much of the U.K.’s hyper-productive finance industry to relocate. However, Nissan, one of the companies with the most to lose if the U.K. ends up outside the EU’s customs union, just announced it would make the next generation of its Qashqai SUVs in its plant at Sunderland in north-east England. That’s exactly the kind of long-term decision that people expected to go to other locations due to Brexit-related uncertainties. For now, the cost advantages accruing from Sterling’s depreciation appear to be holding such fears in check. BBC
• Amazon’s Mad Money for Mad Men’s Matthew Weiner
Amazon has signed up Matthew Weiner, creator of Mad Men and writer of two series of The Sopranos, to write a drama series for it. It’s paying him a cool $70 million, in what is the starkest expression yet of the arms race for original content at the companies disrupting the world of television. Details about the new series—Weiner’s first since Mad Men ended last year after seven seasons—are still sparse. Weiner is expected to write and executive produce the eight-episode television project while directing about half of the episodes. The series will also reportedly be set in present day. Fortune
• They’re Only Buying it for the Interviews
What is the Playboy brand worth, now that it has stopped carrying nude photos? Hollywood executives Jeff Sagansky, formerly of CBS Entertainment and Sony, and –MGM boss Harry Sloan are reportedly in advanced talks to acquire the magazine’s publishing company, Playboy Enterprises, through an acquisition vehicle they launched last year. Playboy Enterprises is one of a portfolio of assets that Sagansky and Sloan are looking to buy from Rizvi Traverse Management for between $2 billion and $3 billion, according to Reuters. Rizvi also has a portfolio of small stakes in tech startups including Twitter and Square, although it’s not clear whether these would be included in any deal. Fortune
Summaries by Geoffrey Smith Geoffrey.email@example.com;