By on October 27, 2016

Bob Lutz

Bob Lutz has worked as an executive for General Motors, Chrysler, Ford, and BMW at various points in his storied life. Saying he’s a man who is well-versed in the automotive industry would be a colossal understatement. And that expertise has led him to the assertion that a certain manufacturer is a cult led by a false god.

That, Audi has abandoned its wildly successful career in endurance racing for something far less popular, Ford takes a financial body blow, and Volkswagen Group continues to suffer with Porsche as its sugar daddy… after the break!

by OnInnovation/Flickr -- Elon Musk

Former GM executive is no fan of Tesla or Elon Musk

Bob Lutz doesn’t have a whole lot of faith in Tesla. The former General Motors vice chair expressed that skepticism in an interview Wednesday, telling CNBC that he thought “Tesla supporters are like members of a religious cult.” He went on to say that Elon Musk is “seen as a new visionary god who promises this phantasmagorical future, a utopia of profitability and volume.”

“I just don’t see anything about Tesla that gives me any confidence that that business can survive,” Lutz said, adding that he expects the company to suffer an eventual financial collapse “unless people keep pouring new money in ad infinitum.”

Tesla reported a worse than anticipated loss in the second quarter and revenue that fell short of estimates. The company has also spent a massive amount of money on its Gigafactory in Nevada and production improvements at its Fremont, California assembly plant. But it surprised everyone with a reported $22 million net profit for this third quarter — its first profit in more than three years.

Tesla also earned 71 cents a share on an adjusted basis in the third quarter on $2.3 billion in revenue. Analysts expected a loss of 54 cents per share on $1.98 billion in revenues. However, a significant amount of Tesla’s third quarter revenue came from pollution credits it sold to other automakers.

R18 etron

Audi leaves endurance racing for electric series

With the exception of Porsche, Audi has taken away more wins from 24 Hours of Le Mans than any other team. When the new millennium dawned, Audi began its domination of the race and ensured itself a prominent role in FIA World Endurance Championships. Their new role in that race will be a purely historical one, however, as Audi has announced it will be leaving Endurance racing for Formula E.

Motorsport.com reports:

In a statement released on Wednesday, Audi said it will shift its primary motorsport focus to the Formula E championship – where it is partner to the Abt Schaeffler team – while maintaining its DTM programme. A decision on its World Rallycross programme has yet to be made, with Audi suggesting it could provide works backing to the EKS team run by its long-time DTM driver Mattias Ekstrom. Audi’s Chairman of the Board of Management Rupert Stadler said: “We’re going to contest the race for the future on electric power. As our production cars are becoming increasingly electric, our motorsport cars, as Audi’s technological spearheads, have to even more so.”

Volkswagen Group is still reeling from the shame and multi-billion dollar expense of their diesel emissions cheating scandal. As a result, the parent company has shifted Audi’s focus toward “clean” hybrids and electrics. Audi’s diesel-powered R18 e-tron quattro may have been a great race car, but it doesn’t fit the image VW wants Audi to present anymore. Who would have guessed that winning races would create an image problem for an automotive brand?

ford logo

Ford Q3 profit drops 56 percent

Automotive News reports that the Ford Motor Company’s third-quarter income dropped from its stronger performance a year ago as global revenues dipped slightly.

Net income was $957 million. Ford’s pretax profit was $1.41 billion, down 55 percent from the third quarter of 2015. Revenues were $35.9 billion, down $2.2 billion from a year earlier.

Ford CEO Mark Fields said that “we remain on track to deliver one of our best profit years ever.” Ford is sticking with its guidance that its full year pretax profit will around $10.2 billion, which it decreased to account for charges in its ongoing door-latch recall of

Automotive News said:

In September, Ford said it will recall 1.5 million more vehicles for faulty door latches after federal regulators told the automaker that a regional recall in the previous month was insufficient.

Ford said the recall would cost about $640 million and reduce its projected third-quarter adjusted pretax profit by nearly 40 percent.

VW logo

Down but far from out: VW profits continue to tumble 

Volkswagen AG reported a 56 percent drop in second-quarter profit, hit hard by costs stemming from its emissions-cheating scandal. Third-quarter profits were more of the same.

Automotive News Europe reports:

Volkswagen Group said third-quarter operating profit at its core VW brand plunged more than half, adding weight to management calls for cutbacks at the the automaker’s biggest division.

Operating profit at the VW brand dropped to 363 million euros ($396 million) from 801 million a year earlier, VW said today, or just 1.5 percent of sales.

Skoda, Spain’s SEAT, Porsche, and the company’s truck division softened the blow by driving Volkswagen’s automotive operating profit higher. This compensated declining earnings at Audi, the Volkswagen passenger car brand, and Bentley.

CEO Matthias Mueller said in a statement that VW Group remains “fully operational in spite of the present pressures.”

[Images: General Motors; OnInnovation/Flickr (CC BY-SA 2.0); Audi; Ford Motor Company; Volkswagen]

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61 Comments on “TTAC News Round-Up: Bob Lutz Says Tesla’s Most Successful Product is Kool-Aid...”


  • avatar
    PrincipalDan

    “Former GM executive is no fan of Tesla or Elon Musk”

    Awwwwwwwwwwwww Bob, you jelly?

    To me you’ll always be the guy with one leg up on a rolled over Opel, lighting up your stogie.

    • 0 avatar
      SCE to AUX

      As you know, Maximum Bob’s opinion about Tesla is well understood. His utterances on the subject are as well-worn as campaign slogans.

      IMO, Bob is always half-right about Tesla.

    • 0 avatar
      dash riprock

      Maybe he knows the financial challenges of a money hemorrhaging auto manufacturer and is commenting upon that? Not sure why you relate his comments to jealousy.

      • 0 avatar
        PrincipalDan

        It’s snark. Bob loves being in the spotlight, Bob is retired so he’s not in the spotlight (much) anymore. Musk is in the spotlight because of his company and his personality. Ergo Bob is jealous.

        My picking on him has to do with the history of my avatar as well. First it was Bob with his hand cupped to his ear during a question and answer session at the NAIAS. A few of the B&B swore it was Leslie Nielsen. So when Leslie Nielsen died I changed to Leslie Nielsen as Dick Steele in “Spy Hard” – then a few of the B&B swore it was actually Bob Lutz.

        Now I’ve got General Buck Turgidson as a commentary on the rabid politics of the B&B and how (Just like in Dr. Strangelove) we’re all more or less crazy.

  • avatar
    carveman

    You tell them Bob. The alternative energy fairies have one problem.

    Physics.

    • 0 avatar
      zerofoo

      Naw – not really.

      I can assure you that every single electric vehicle sold by Tesla obeys every law of physics.

      The real problem alternative energy fairies have is ECONOMICS.

      That said, I have a Model 3 on reserve, and I plan to charge it with electricity made from good old coal and nuclear.

      • 0 avatar
        WheelMcCoy

        Don’t forget, electricity is also generated from relatively clean natural gas.

        Here’s the break down in the U.S.
        Coal = 33%
        Natural gas = 33%
        Nuclear = 20%
        Hydropower = 6%

        • 0 avatar
          DevilsRotary86

          Rather off topic, but seeing those figures always reminds me how interesting electricity generation is in my home state of Texas.
          From EIA.gov:

          50.8% Natural gas
          29.1% Coal
          0% Hydropower
          7.8% Nuclear
          12.3% Wind

          • 0 avatar
            jhefner

            Interesting, but not in the least bit surprising. We are sitting on top of the Barnett Shale, one of the largest natural gas finds in recent history; while we also have some of the highest average wind speeds in the country in the mid and panhandle areas of the state.

            Texas also bowed to the EPA, and agreed to shut down the lignite mines/plants that have been operating in the state; all the plants they fed will either be shut down or ran on low-sulfur coal from the Power River Basin up north.

            I worked in the Utility industry from 1990 to 2001. I believe all of the natural gas plants I saw in the Houston area are now gone; and the two that remain in the DFW area (Handley and Mountain Creek) are only used for peaking power and are owned by an out-of-state third party broker. Most of the electricity generated by natural gas comes from combined cycle units, which are way more efficient than traditional conventional boilers/steam turbines. Much of that peak demand during the daytime is handled by wind power now; and I still occasionally see turbine blades and nacelles heading west on Interstate 20.

            The industry has really changed a lot more than even those statistics tell in the past decade.

    • 0 avatar
      VoGo

      Tesla haters have one problem.

      Lack of vision.

      Also, terrible math skills. Make that two problems.

      • 0 avatar
        VoGo

        Also, they confuse what they wish were true (that climate change was a fantasy or Chinese hoax) with what actually is true. So make that three problems.

        • 0 avatar
          2manycars

          I don’t think anyone believes that “climate change” is a fantasy. The Earth’s climate has been changing for billions of years, it’s a natural phenomenon. The fact that the climate changes is indisputable. Chances are the ground where you currently sit was once under water or under a glacier. (Possibly both, at different times.)

          The fantasy element comes in when this natural phenomenon is blamed on human activity, and even more fantasy is involved when the climate change hucksters of the political class want us to believe they are going to control the earth’s climate. The measures to be employed just coincidentally funnel yet more power and confiscated wealth to the psychopathic, violent criminal gangs commonly known as “governments.” (Elected gangsters are still gangsters – and it looks like we’re on the cusp of electing a craven, insanely corrupt criminal to the highest office in the U.S.!)

          All we can do about climate change is adapt to it, and be thankful that there is an overall warming trend rather than a retreat back into an unsurvivable ice age.

          As far as Tesla and Musk, I say withdraw all special government consideration and subsidies (including the carbon credit scam) and let them sink or swim in the marketplace.

          • 0 avatar
            JohnTaurus_3.0_AX4N

            @2manycars,

            Excellent, good sir. Excellent.

          • 0 avatar
            TTCat

            @2manycars,
            Spot on Sir – well stated on all points.

          • 0 avatar
            Brett Woods

            @2manycars: It’s the rate of change that is the fingerprint. Both the rate of climate change and the rate of atmospheric gas concentration change.

            Or look at it in a simplistic way and use middle school math. Calculate the volume of good stiff atmosphere – about 10 000 feet of it, or go up to the highest a wing will work – say 50 000 feet. Or go up all the way up to space at 100 000 feet. (Use the formula for volume of a sphere and subtract the two spheres). Then calculate the yearly volume of human introduced combustion gases. You’ll have to do a lot of adding! Remember that gas transformation is cumulative. How could it not invoke change? How could it not?

        • 0 avatar
          Kenmore

          “Tesla haters have one problem.”
          “Make that two problems.”
          “So make that three problems.”

          AMONG the problems T***a haters have…

      • 0 avatar
        jkross22

        The Tesla faithful also have one (well, primarily one) problem.

        Profitability isn’t based on faith. It’s also not derived from acquisitions of a failing company.

        Seems you’re confusing those who hate Tesla with those who trust math more than tweets.

        • 0 avatar
          VoGo

          jkrosse,
          Tesla was profitable in Q3. Publicly released documents. No faith required.

          • 0 avatar
            jkross22

            Yes, and the last profitable quarter they had was a few years ago. I wouldn’t pop the champagne corks just yet.

            Braniff had some profitable quarters, too.

          • 0 avatar
            dash riprock

            How was the profit achieved?

            Delayed 2nd quarter deliveries?

            Slashed Capital expenditures?

            Delayed 2nd quarter ZEV credits?

            They are going to be very desperate for cash soon, have to think every trick accounting wise was used to show a profit before a capital raise

    • 0 avatar
      Zykotec

      Having driven one ‘normal’ model S, and having been passenger in a ‘performance’ version, I can tell you that a Tesla doesn’t care about your old fashioned ‘physics’.

  • avatar
    indi500fan

    “a significant amount of Tesla’s third quarter revenue came from pollution credits it sold to other automakers.”

    While I’ve felt for years that Tesla stock was a slam dunk short long term, I’ve also learned – never bet against a crony capitalist.

  • avatar
    VoGo

    I wonder who is angrier that Tesla is profitable – Lutz or PCH?

    • 0 avatar
      Pch101

      That’s cute. But the profit came from revenues that are unsustainable. (If you know what ARPU is, then I would suggest that you calculate it.)

      I suspect that Musk pushed deliveries of high-dollar units during Q3 in order to create a blip. There was no point in waiting until Q4, since the focus at that point would be on the full year of operations that will surely come in at a net loss.

      To put it another way, if Tesla had per-unit revenues on par with last year, then it would have reported another loss. Revenue has leaped, presumably due to the Model S. (I’m not sure about the pollution credits claim above being true; in my quick review, I didn’t see anything that supports or disputes that claim.)

      • 0 avatar
        Eiriksmal

        http://www.zerohedge.com/news/2016-10-26/tesla-earnings-smash-expectations-after-dramatic-change-reporting-methodology

        I don’t understand any of it, but the “quants” are still laughing about the rabid, unwavering support for TSLA.

        What I do get is that the sudden switch to GAAP was only done to benefit the headlines, while making it extremely difficult to compare Q3 2016 to other quarters.

        • 0 avatar
          Pch101

          I would not bother with Zero Hedge unless you have some sort of love of conspiracy language and a reboot of the Soviet Union.

          In any case, I see that the ZEV credit revenues made the difference. That’s not a bad thing per se, but the fact that there was virtually no ZEV credit revenue during Q2 suggests to me that the amount of revenue from the credits might in effect be a carryforward from the previous period. In other words, it’s more revenue than one would normally expect from the credits, and not something that can be expected in the future.

        • 0 avatar
          renewingmind

          The shift to GAAP from non-GAAP is a good thing. GAAP= Generally Accepted Accounting Principles. In other words, their numbers are becoming more trustworthy.

      • 0 avatar
        Luke42

        @PCH101,
        “I suspect that Musk pushed deliveries of high-dollar units during Q3 in order to create a blip.”

        As someone in the receiving end of Tesla marketing (I’m a Model 3 reservation holder), I received a lot of announcents about lower priced Model S options during this last quarter. They were even advertising a $600ish/no low-mileage lease on a base version of the Model S.

        Those lower cost options were abruptly discontinued a few weeks before the end of the quarter.

        It looked to me like Tesla was chasing volume on the low end of their current product mix.

        I didn’t follow it up with any formal rigor; I’m just reporting the marketing campaign that was sent my way. But it sure looked to me like they wanted to lease me a Model S60 with a software-limited 75kWh battery, in order to temporarily goose their numbers.

        P.S. I really wanted the $600/mo lease on the Model S, but it wasn’t a good fit for us. We’re holding out for the Model 3.

        • 0 avatar
          Pch101

          Revenue is recognized when the car is delivered to the customer. It doesn’t matter when you ordered it.

          It’s not a secret that customers who buy the higher priced models get their cars built more quickly. All of its cars are made to order. So the company has more flexibility than other automakers to decide when it books revenue for a given sale, and it can juggle its deliveries accordingly.

    • 0 avatar
      28-Cars-Later

      My limited understanding of the “success” was its accomplishment was due to accounting trickery. I’d wait to hear from someone who understands accounting before I’d get too excited.

      • 0 avatar
        Paul Alexander

        It’s not difficult for companies to make the books sing the preferred tune.

        • 0 avatar
          Pch101

          It is actually difficult to cook the books for an extended period. But one quarter is not an extended period.

          Revenue is recognized when vehicles are delivered. Tesla is unique in that it has some control over which customers get prioritized during a given period.

          Tesla’s revenue from automotive was almost $87k per unit during Q3, far higher than it used to be. That’s what produced the profit, and I wouldn’t expect that to last.

      • 0 avatar
        SCE to AUX

        Tesla’s profit was calculated under GAAP (Generally Accepted Accounting Practices) this time, but it will not return for a while.

        It was higher under “non-GAAP” rules, but so is everybody’s.

    • 0 avatar
      WheelMcCoy

      wait…a… minute… I’ve never seen Lutz or PCH together in the same room! Could it be… ? :)

      • 0 avatar
        Luke42

        If you want to guess where pch101 works, watch carefully to see which companies/products on which he declines to comment.

        But let’s respect the guy’s anonymity. We all need to spout off on the Internet semi-anonymously, and getting yelled at for the substance of our arguments is a great way to both remain humble and be prepared. Kind of like a fight club.

  • avatar
    SCE to AUX

    The carbon credit system should be abolished, but Tesla earns these credits because it’s moving a lot of ‘green’ vehicles – possibly 80k this year. Tesla’s income from these credits is criticized, but it will continue into the distant future.

    Oddly, Ford, GM, Nissan, and FCA aren’t criticized for the carbon credits they earn.

    Tesla’s profitability will be fleeting, and they’ve said as much. Tesla’s *only* hope for long-term viability is the Gigafactory’s promised ability to reduce battery costs.

  • avatar
    WheelMcCoy

    Heh… TTAC… I see what you did there. Lutz dumps on Tesla, but Audi leaves Le Mans to pursue Formula E.

  • avatar

    I’m not exactly a big fan of Tesla
    but at what point does one’s mind atrophy to the point where you just reject anything new and different?

    The worst that would happen at this point is Tesla executes a strategic bankruptcy and gets sold to some gigabillion dollar Chinese company and they keep making cars, maybe not super bleeding edge and maybe not autonomous but… to think they will just blink out of existence seems really foolish.

    I feel Elon is in a very long game – something the Auto Industry has probably never played. I’d argue the cars are just a vehicle (see what I did there?) for much bigger fish. He’s going after Energy, Mass Transit, Space, etc… We all can agree that Sergio is batshit crazy – but he’s not wrong when he says the Auto Industry needs to be pared down.

  • avatar
    don1967

    Let’s just all agree that Elon Musk is to business what Neil deGrasse Tyson is to science.

  • avatar
    pickypilot

    If GM can manage to build me a car that even comes close to my overall Tesla experience, I’ll buy it.

    Tell me, Mr. Lutz, Why does Cadillac show “vapor cars” at the major auto shows that invoke an enthusiast’s wet dreams, then turn around and build their version of a “halo” car with all the high energy and excitement of an Enya concert.

    All this talk of Kool Aid, Cult followers? I think not. We’re all actual Tesla owners who look forward to our next one and not waiting for an Elmiraj, Escala or the stunning Ciel to roll of the line.

  • avatar

    the picture of Lutz must be at least 25 years ago. he was part of the team that bankrupted GM, so his opinion is of no interest to this reader.

  • avatar
    EBFlex

    Lutz is absolutely right. Tesla is a house of cards company the produces high end fashion accessories at a phenomenal loss.

    Tesla is the biggest joke the auto industry has seen in a very long time.

  • avatar
    Big Al from Oz

    If one sits back and look at what is occurring outside of Tesla by “recognised” manufactures, Tesla doesn’t look that innovative. In the EV market Tesla will not hold up as it is.

    The Gigafactory will become a loss maker for the reasons I’ve pointed out in the past, ie, reliance on secondary and tertiary “taillings/by products” of mining.

    Tesla has been compared to the new Apple often, this is a mistake. Tesla is no “Apple”. Its niche and will always be so, the large manufacturers will have no other way.

  • avatar
    Brett Woods

    Ashes to ashes, dust to dust Bob. Follow, or get out of the way. As with Audi’s P1 LeMans cars – they won and won. Time to move on. There is opportunity in Formula-E and it’s the future. The drivers love it and they are all the greats and the families of the greats. There is a sense of ‘anything can happen’ in that series. I’m just getting into it.

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