Good morning.
The battle between President-elect Trump and the Ford Motor Co. is continuing post-election, and provides a glimpse into what big business might expect from a Trump administration.
At 9 p.m. last night, Trump posted a notice on his Twitter account saying Ford Chairman Bill Ford had just told him the company “will be keeping its Lincoln plant in Kentucky – no Mexico.” He later wrote in a second post “I worked hard with Bill Ford to keep the Lincoln Plant in Kentucky. I owed it to the great state of Kentucky for their confidence in me!”
But the company said it never had any plans to shut the Kentucky plant, and likely could not do so under its United Auto Workers contract. At issue, instead, was the company’s plan to move production of one car, the MKC sport utility vehicle, to Mexico and replace it with expanded production of the Ford Escape. It will now continue to manufacture the MKC in Kentucky.
Ford, clearly not eager to extend its fight with the incoming president, issued a diplomatic statement saying: “We are encouraged that President-elect Trump and the new Congress will pursue policies that will improve U.S. competitiveness and make it possible to keep production of this vehicle here in the United States.”
Meanwhile, leaders of Pacific Rim countries – including President Obama and Chinese President Xi Jinping – are gathering in Peru this morning to ponder the future of trade arrangements. The U.S. spent five years working on the Trans-Pacific Partnership, an trade arrangement that excludes China. But President-elect Trump has branded the deal a “disaster.” Now President Xi is pushing an alternative, the Regional Comprehensive Economic Partnership, which excludes the U.S.. In related news, Vietnam said yesterday it would shelve ratifying TPP.
More news below.
| Alan Murray | |
| @alansmurray | |
| alan.murray@fortune.com |
Top News
• There’s No Stopping the Dollar (or the Bond Rout)
Yields on 30-year Treasury bonds touched 3.05% overnight, while the 10-year benchmark hit 2.34%–both 17-month highs–in anticipation of higher growth and inflation next year. The more policy-sensitive 2-year note also broke through 1% for the first time in a year as comments from the Fed’s Janet Yellen and the lowest weekly jobless claims number in 43 years all but nailed on a December rate hike. The surge in yields dragged the dollar to a new 14-year high. The yen, yuan and euro are all giving ground this morning, the last due also to a gloomy speech by ECB President Draghi this morning. Meanwhile, the global dollar shortage gets worse: Malaysia had to cool speculation over capital controls overnight, while Mexico raised its key interest rate by 0.5 percent to 5.25%. Reuters
• Volkswagen’s Day of Reckoning
Volkswagen will cut up to 30,000 jobs over the next five years as it remakes its core VW brand in the wake of the diesel emissions scandal. Over two-thirds of the jobs will go in Germany, as a consequence of a wholesale transition to electric vehicles that will make much of its current engine operations redundant. Job-sharing, early retirement and other forms of natural attrition will be used to mollify the group’s powerful domestic unions. The group’s shares were oddly unmoved, rising only 0.6%, but outperforming the local benchmark index in early trading. The company is set to confirm its plans after a board meeting later Friday. Fortune
• Amazon Gears up for Global Fight With Netflix
Amazon is set for a massive rollout of its streaming video service, in an effort to challenge Netflix for global primacy in the sector, according to The Wall Street Journal. The e-commerce giant likely will expand its video service into about 200 countries and territories, the WSJ said, citing “people familiar with the matter”. The two providers have differed in their international strategy so far, with Amazon concentrating on depth of penetration in a handful of mature markets, bolstered by heavy investment in original content. Netflix has spread its service more widely, buying in content that it thinks will be globally popular. However, it too has invested more in original content as rival providers have become leery about giving their goods away. WSJ, subscription required
• Tesoro Buys Western Refining
A big deal in the under-pressure oil refining sector: Tesoro will buy Western Refining for $4.1 billion, significantly bulking up its presence in Texas, New Mexico and Minnesota, in other words, getting closer to the places where much of the U.S.’s oil will be produced in future, and cutting its dependence on California (where the transition to electric vehicles might reasonably be expected to come fastest). Western’s shares rose 23% on the news although the offer is still nearly 20% below their peak of last year). As with many refiners, Western's shares had fallen this year as the glut of cheap shale oil had dried up, squeezing margins. WSJ, subscription required
Around the Water Cooler
• Airbnb Remakes Itself
After months of rumors, Airbnb has unveiled a plan to extend beyond just providing lodging for travellers. On Thursday at its annual conference for hosts in Los Angeles, Airbnb introduced a revamped version of its app, which is now organized around “Experiences,” “Places,” and “Homes.” The experiences section includes the long-awaited “Trips” program, that lets travelers books a range of activities are part of their travel plans. Airbnb will take a 20% cut from the revenue from activities (except those with non-profits), a bigger cut than the 3% it takes from home bookings. Given the pressure on its original model from angry city governments and tax inspectorates, new sources of revenue can’t come quickly enough. Fortune
• About That Swamp-Draining...
J.P. Morgan paid a $264 million fine and admitted violating the Foreign Corrupt Practices Act, trying to win business in China by hiring the sons and daughters of well-connected officials. The DoJ called the “Sons and Daughters Program” ‘nothing more than bribery by another name.’ Such bribery, it will surprise no-one to hear, was as utterly routine as the fraudulent selling of mortgage debt. Settlements with other banks including Citigroup, Morgan Stanley, Credit Suisse, UBS and, inevitably, Deutsche Bank and HSBC, are also pending. FT, metered access
• Valeant Executives Charged
Federal prosecutors charged former Valeant managers Gary Tanner and Andrew Davenport with fraud and money-laundering. The two executives were the masterminds behind Valeant’s strategy of using pharmacy chain Philidor to make health insurers pay for expensive, branded drugs from Valeant where most pharmacies would have prescribed cheaper generic drugs. Tanner and Davenport took a combined $50 million in “concealed kickbacks” as part of the process, prosecutors say. The exposure of the scheme broke open a broader scandal about Valeant’s business practices that led to CEO Michael Pearson being replaced by Joseph Papa. Tanner and Davenport deny any wrongdoing. Bloomberg
• Tesla, SolarCity Merger Approved
In the end, it was pretty clear cut. Some 85% of unaffiliated shareholders in Tesla and SolarCity approved the merger of the two companies, buying into Elon Musk’s vision of an integrated clean energy company that will leverage its expertise across both transport and power. In a typical flourish after the results were made known, Musk announced the launch of a new solar roof product that “looks better than a normal roof, lasts twice as long, costs less and—by the way—generates electricity.” SolarCity’s shares rose nearly 6%, and even Tesla’s rose 3.1% as the margin of support appeared to cut the risk of further shareholder resistance. Now all Musk has to do is execute his plans. Most analysts expect the company will need to ask for more money early next year to do that, most likely in the form of equity. Fortune
