Editor’s note: Welcome to So That Happened, our editors’ takes on things going on in the manufacturing world that deserve some extra attention. This will appear regularly in the Member’s Only section of the site.
BRIC Investing Looking Like a Lump of Building Material
With Russian bank accounts frozen worldwide and heavy sanctions levied against the country’s financial sector, wealthiest citizens and its political leaders, let’s take a look at investing advice from a long-ago age.
In 2001, Goldman Sachs coined the acronym BRIC to describe Brazil, Russia, India and China, the four fastest-growing economies in the world at the time. Manufacturers rushed to all four countries, hoping to tap into low-wage labor, growing consumer middle classes and export opportunities.
A few decades later, half of that strategy looks pretty good. While China’s growth in the past 21 years has been staggering and India’s has been meteoric though lower than China’s, Brazil and Russia haven’t quite lived up to the hype—well, not evenly at least.
If you started with $100,000 to invest, split evenly between the four BRIC economies in 2001, based on GDP growth (as measured by the World Bank) in those countries, by the end of 2020, you’d have had:
- BRIC ($25,000 invested in each country): $292,348.47
- USA ($100,000 stating funds): $140,443.89
So, clearly Goldman was onto something. However, China and India absolutely dominate those results. If you’d put all $100,000 into those countries directly, instead of including Brazil and Russia, you’d have had:
- China: $528,204.83
- India: $312,307.95
You’d have made money in Russia and Brazil over that full 20-year period, but not a lot.
But, who are we kidding. Holding onto one investment for 20 years without flinching or cashing in isn’t too likely for most people.
If you’d started with $100,000 in 2009, as the world was emerging from the Great Recession, you’d have had:
- BRIC: $161,079.99
- USA: $118,180.32
- Brazil: $110,290.64
- Russia: $109,095.86
- India: $190,497.30
- China: $234,436.18
Russia has been the worst performing of the BRICs for the past 10 years especially, although in more recent years, Brazil has also been a bad bet. Russia’s economic growth has lagged global growth since 2014 when it annexed Crimea from Ukraine and most Western nations imposed sanctions against it.
Obviously, it’s easy to look back and spot the bad bets in hindsight, but the old axiom for investments remains—high yields mean high risks. While the IC in BRIC did well, its BR has left investors cold in recent years.
Wait, Ford is Someone’s Name?
Ford decided to split management of the company in two last week with Ford Blue handling gasoline- and diesel-powered vehicles and Ford Model e handling its burgeoning electric vehicle business. The Model e name is a great reminder of one of the industry’s most childish fights in recent memory.
Telsa in 2013 tried to name is first mass-market car the Model E, but Ford opposed it, saying that the automaker has been using the Model+Letter naming convention since the release of the Model T, noting vehicles such as the Model A, Model F, Model K and Model R sold throughout the years.
Tesla eventually gave up the fight and named its vehicle the Model 3, thwarting CEO Elon Musk’s desire to have a SEXY company, selling Telsa’s Model S sporty car, a Model E mass-market vehicle, Model X crossover and Model Y hatchback.
Telsa fans spotted the name right away, criticizing Ford for its lack of originality. As longtime automotive journalist Nick Bunkley responded, “Ford even named itself after some guy born in the 1800s, just like Tesla did!”
Rivian CEO: Sorry About That
Saying you’re sorry can be really expensive. Electric vehicle startup Rivian learned the hard way this month that customers expected certain things when they put $1,000 deposits down over the past two years on pickups and SUVs that won’t be available until later this year at the earliest.
The biggest expectation? The vehicle they ordered for the price listed on the website at the time of ordering it.
Facing rising commodity prices and supply chain snags, Rivian did what lots of companies are doing these days—raised prices by about 20%. The March 1, 2022, increase reflects rising costs, and if CEO RJ Scaringe had announced price increases for future orders, there likely wouldn’t have been much reaction outside of people grumbling about missing their chances to by $70,000 EV SUVs.
Rivian, however, decided to apply the higher prices to the more than 40,000 pre-orders. Customer who had assumed that $1,000 deposits placed more than a year ago carried pricing locks were more than a bit peeved with many cancelling their orders and demanding their money back.
“As we demonstrated [in early March], trust is hard to build and easy to break. In speaking with many of you over the last two days, I fully realize and acknowledge how upset many of you felt,” Scaringe said in a letter to customers. “I have made a lot of mistakes since starting Rivian more than 12 years ago, but this one has been the most painful. I am truly sorry and committed to rebuilding your trust.”
The company pledged to honor the prices customers had accepted on all pre-orders, and it will let those who cancelled their reservations reinstate them at the original price. Those decisions will likely lock in some future losses for Rivian, but its 48-hour response in honoring the original contracts could buy it some goodwill.
Women Stepping Up to the Job
It used to be associations would have awards for the Top 10 in the field. Well it’s a good sign of the times that on March 2 when NAM announced its 2022 STEP Ahead Honorees and Emerging Leaders, there were 130 of them.
The STEP awards were created ten years ago and so far has honored 1,000 women. Women from this list are employed at companies including, Pratt& Whitney, Toyota, Sherwin-Williams, Harley-Davidson, Medtronic, Honeywell Aerospace, Molson Coors, Dow, GM, P&G, GM, GE and many more.
Aside from recognizing the contribution these women have made, there might even be a not-so-subtle reason for these awards. There are a lot of open jobs—averaging more than 800,000 open jobs a month for the past year—according to Carolyn Lee, president of the Manufacturing Institute (NAM’s workforce development partner).
“These remarkable women and the leadership they show help inspire the next generation of female leaders to consider careers in manufacturing,” 2022 STEP Ahead Chair Denise Rutherford, said in a statement.
Alpha Auto
It was an odd show of … confidence? Of masculinity? Of something?
As Lordstown Motors Corp.’s fourth-quarter earnings call Feb. 28 neared its end—having discussed the startup electric vehicle maker’s urgent need both for cash and the signing of a wide-ranging partnership deal with Foxconn—Bank of America analyst John Murphy both zoomed out and got a little personal.
Making the point that EV startups have a central figure, usually the founder, around which things revolve and who is “just truly pushing things through,” Murphy made sure to qualify his question by adding that he doesn’t doubt the skills or experience of CEO Dan Ninivaggi, President Ed Hightower or other senior Lordstown executives. But he nevertheless was blunt: “We have this single founder that is responsible for absolutely everything […] and it's not necessarily apparent here. I mean, who is that person? And how confident are you that that person is really going to be able to get this done?”
In retrospect, Ninivaggi—who took the helm at Lordstown last summer—had no option but to respond as he did.
“So, look, I've been around the industry for a while,” he said. “I worked for Carl Icahn for 10 years. I've been through challenges. And this is one of the most challenging situations I've seen. But I knew it coming in, right? I knew what I was getting into when I joined the company and it's played out pretty much exactly as I thought it would.”
Ninivaggi then lauded Hightower’s work honing Lordstown’s operations, praised CFO Adam Kroll and said new engineering talent is raising the bar further for the company’s work on its Endurance pickup truck. He, Ninivaggi, is focused on the strategic aspects of positioning Lordstown not just among its EV peers but also, by picking its spots, as a worthy competitor to large players. Key to doing that, he added, is getting the Foxconn partnership agreement across the finish line, which will let Lordstown raise the funds it needs to launch the Endurance in earnest.
Then the kicker: “I think we're going to get there. And if you want to know who the alpha male is in this company, you're talking to him. It's me.”
Do We Really Have to Offer Pet Insurance?
I was talking with a GenZ woman at my hiking group last week and she was talking about her job. True to the studies I read she was talking about the higher purpose of her job, but she did mention that her company offers pet insurance as a benefit.
It got me thinking about what attracts this generation to particular jobs. An article in BenefitsPro, written by Sunny Saurabh, CEO of Interviewer.AI, offers the top five benefits Gen Z is looking for when job hunting.
- Skills development in an attention-grabbing industry
- Prioritizing work-life balance
- Instant recognition and gratification
- Faster growth curve
- Active role in decision-making processes
