Good morning.
| Alan Murray | |
| @alansmurray | |
| alan.murray@fortune.com |
Ride-hailing giant Uber continues to hook customers, but at massive cost. A report out from tech news site The Information says Uber lost a whopping $800 million in the third quarter, and is on track for an operating loss of $2.8 billion for the year. Gross revenues grew just 8% over the second quarter to $5.4 billion, but net revenue – which excludes driver revenues – grew 240% to $1.7 billion. That suggests the company is making progress down the path to profitability, but still has a ways to go before it is ready for public markets.
Meanwhile, the company is in a stand off with California regulators, which have told it to cease operations of the self-driving cars it is operating in the state because they lack a required testing permit. Uber says it doesn’t need the permit, because its cars require a person to constantly monitor the driving. The company also admitted the autonomous cars have a problem navigating San Francisco’s bike lanes – a problem with which I am sympathetic.
More news below.
Top News
• Terror at the Market, Terror in the Gallery
Even those desensitized by an endless stream of violence this year were jolted by two more sickening acts of terrorism. Twelve people were killed and 48 injured when a man drove a truck into a Christmas market in central Berlin. Earlier, a rogue Turkish policeman had gunned down Russia’s ambassador to Ankara in what he said was an act of vengeance for the conquest of Aleppo by Russia’s Syrian allies. The Berlin attack was reportedly carried out by a man who had arrived in Germany as a refugee from Pakistan late last year, a detail that, if confirmed, will embolden Germany’s radical right to claim they were right all along about the failings of Angela Merkel’s ‘welcome culture’. The Ankara attack suggests that Recep Tayyip Erdogan will have trouble dismounting the Islamist tiger he has ridden in his pursuit of ever-greater power at the heart of the Turkish state. Time
• Trump Taps Panthers Boss Viola for the Army
Donald Trump nominated Vinnie Viola, the former boss of the New York Mercantile Exchange, founder of high-frequency trading group Virtu and owner of the Florida Panthers NHL team, as Secretary for the Army. The son of a Brooklyn truck driver, Viola was a West Point graduate and an officer in the 101st Airborne Division before making his mark as a commodities trader. He was one of the pioneers of the analytics-based approach to sports management documented in the book and movie Moneyball. Other news from Team Trump yesterday included a Bloomberg report that Debra Wong Yang was the President-elect’s top choice to succeed Mary Jo White as head of the Securities and Exchanges Commission. Fortune
• The Charmed Life of Christine Lagarde
International Monetary Fund managing director Christine Lagarde was convicted of negligence in a French court for failing to stop an inappropriate 403 million euro payout to an ally of her then-boss Nicolas Sarkozy back in 2008. The court chose not to sentence her. Within hours, the executive board of the IMF also decided that she had suffered enough, and reaffirmed its full confidence in her leadership. We have no beef with Mme Lagarde, who is a fearsomely intelligent and capable administrator, a superb diplomat and, to all appearances (as even the court admits), honest. However, the IMF’s hasty reaction suggests it gave little serious thought to the implications of keeping the world’s financial Fire Department headed by someone convicted of being asleep at the wheel. When the elite takes care of its own so indulgently, it can hardly be surprised at the march of populism. Fortune
• GM To Idle 5 Plants in January
General Motors will shut five U.S. auto assembly plants for varying durations in January, primarily to cut oversupply of sedans that have fallen out of favor among consumers. GM had built up inventory recently and will be cutting back on that supply after the end of the current year. In October when it reported third-quarter earnings, GM said it has increased its U.S. dealer inventory by 111,000 vehicles. By the end of November, inventory had risen to the equivalent of 84 days of U.S. supply, up from 79 at the end of October. Fortune
Around the Water Cooler
• Lands' End Has a New CEO
Only a few months after firing a CEO with deep roots in the world of luxury, Lands’ End has again tapped an executive with experience in upscale retail to lead it out of a protracted slump. The man in question is Jerome Griffith, last seen selling high-end luggage maker Tumi Holdings to Samsonite. Griffith also has stretches at Esprit, Tommy Hilfiger and Gap under his belt. In contrast to the exotic Federica Marchionni, Griffith will relocate to the company’s HQ in Wisconsin–albeit he’s had the good sense to take up his duties only in March, less than two months before the end of winter. Fortune
• Homebuilders Boosted by Lennar
Shares in U.S. homebuilders rose broadly after an upbeat trading statement from Lennar, the country’s no. 2 homebuilder. Profit and revenue exceeded expectations as the housing market continued to make a “slow and steady recovery,” the company said. DR Horton, the country’s biggest homebuilder, expects its sales to rise by up to 13% in its fiscal 2017 year, despite suggestions from the Federal Reserve that it will raise interest rates three times next year. Approvals for single-family home constructions rose to a nine-year high in November, according to the Commerce Department. Fortune
• Lloyds Buys BoA's U.K. Credit Card Ops Lloyds Bank is to buy the U.K. credit card operations of Bank of America for some $1.9 billion. It’s an interesting deal for a number of reasons, weakening the bank’s capital ratios and betting aggressively on relatively high-risk (if high-margin) consumer credit at a time when the U.K. economy is in a period of high Brexit-related uncertainty. Consumer credit is growing faster than either wages or the economy in general, and local regulators have already issued warnings about it. The deal is also the biggest acquisition Lloyds has made since the British government bailed it out in 2008 at the height of the financial crisis, and comes amid reports that the government is preparing to sell off the last slice of its 43% stake in the group early next year. FT, metered access
• Italy Readies $21 Billion Bank Bailout
Italy’s new government (much the same as its old one, give or take a Renzi or two) asked parliament to approve a 20 billion euro ($21 billion) plan to bail out the country’s most fragile banks. The request for a backstop mechanism creates some positive mood music as Monte dei Paschi conducts its last-ditch attempt to find private investors for a €5 billion capital raising. It does, however, put the country on course for a bust-up with Brussels and Berlin, as the move will be hard to reconcile with EU rules on state aid and on public debt (Italy’s is already 133% of GDP). Reuters
Summaries by Geoffrey Smith Geoffrey.smith@fortune.com;
@geoffreytsmith
