Based on nothing more than life experience, it is extremely rare for a dead project to benefit from an influx of resource. Projects have been revived and success has been had but it's pretty rare. Even with GM money, I would bet against Nikola.
I am interested in speaking to the GM guy that signed off on this deal. What is it he knows, or is this simply a hail mary for GM to remain relevant?
Kickbacks? I've been mostly impressed with Mary Barra. She inherited a mess and has been competent but this deal with Nikola was a gross failure of judgement.
So GM gets 11% of Nikola. Nikola gets to use GM parts, facility, distribute network, and probably sell cars through GMAC finance. GM engineers will probably team with Nikola staff to help develop the truck. If Nikola fails to make a real truck, GM isn't really at a loss of more than time, rent, and autoparts. Trevor Milton says everyone is a liar.
Just reading some coverage of Mary Barra on this deal. She is standing by Nikola, saying they did their "due diligence". She just put her CEO career on the line, although she would probably have been toast if the Nikola turns out to be a fraudulent company, regardless of the endorsement. It's extremely difficult to imagine a situation in which GM actually did anything close to "due diligence". After a reasonably long career in the corporate environment, I find it extremely easy to believe GM did a partnership with Nikola over a "hunch". This sort of thing happens in top down corporations. Top down corporations can move a lot more quickly than an organization with less centralized power but they can only be as smart as the one person who wants to make all the decisions and that isn't smart enough in 2020, particularly in an industry like auto manufacturing. Bosch has also voiced support of Nikola and their vision.
They probably looked at more than we get to see. GM engineers probably poured over the drawings, and spoke to the actual engineers at Nikola. Whatever GM got to see, it was good enough to look like it could work. What we get to see is Trevor Milton. What we don't see is what the actual engineers are doing. I suspect that between what the actual Nikola engineers have in development, and what GM has in their research facility, there is a good probability of an actual vehicle materializing. More than likely, 90% GM existing components. A lot of good stuff from Chevy Volt could be put into use, and adapted to an existing GM pickup chassis. Nikola went public by merging with a SPAC headed by a former GM executive. Trevor Milton is no longer the CEO. As the company moves forward, Nikola could hang Trevor Milton out to dry. They could fire him for all his shenanigans, blame him solely for everything negative like the fake trucks, and move on as a legitimate car company with a competitive product. If it works out, where Nikola trucks are produced and on the road, with GM as an 11% part, GM will probably gain a controlling interest in Nikola.
Why does gm need nikola? Why don't they get some interns to put an electric motor and some batteries in a Sierra, replace the fuel gauge with a battery meter, and call it the e-Sierra? Make 10M like that, put Tesla out of business, and make a ton of money doing it. I should be ceo of gm. Obviously, I could build it into the largest, most profitable, auto manufacturer in a few months.
From a common sense perspective, GM does not need Nikola. In the real world, Nikola is able to do what GM doesn't. Get attention. GM and it's brands are not sought out or favored by a younger market segment. They can't generate excitement or interest. Some things you can't quite put a finger on. GM doesn't have a real problem with building cars. Sure, it's debatable. Maybe GM cars are the best. Maybe GM cars are pieces of sh!t. It doesn't matter. What matters is getting people to buy the car. #1 selling F-150 isn't sold because it's the best car. Whatever reason F-150 sells, and GMC 1500 doesn't, it's not the build quality. The best engineered truck might be Toyota, but Toyota is not #1 in sales. GM is hoping for Nikola sales. Hoping that people will buy the car the way they buy the stock. GM probably believes a Honey Badger Nikola will sell better than a Sonoma/Sierra electric. Remember the Chevy Volt? That was not an engineering failure. It was a marketing failure. Nikola has an attraction. Nikola has marketing ahead of the car. I will buy Nikola once an actual working car is on the road AND Trevor Milton is out of the company.
"As part of the deal, Nikola will exchange $2 billion in newly issued common stock for the in-kind services and access to GM’s global safety-tested and validated parts and components. Nikola also will pay up to $700 million to GM for production costs." GM pays out nothing. GM will profit from parts sales for years to come, as Nikola will ge using GM parts. GM comes out ahead if Nikola can bring a car to market. Nikola now has everything it needs to bring the car to market. Looks like a good deal. Trevor Milton is sort of like Harlan Sanders. He gets to be the public image, but he's in charge of nothing. They will keep him around as long as he doesn't do anything really stupid. And he will go down and take all the blame for past fraudulent activity, as company moves forward as a GM partner under new CEO and CFO.
Speaking on top down management, it only works when there is 5 employees not 100,000. GM failed at EV the last 20years. The Volt was a great concept but pretty worthless in most climates it was sold in. Toyota worked with Tesla for the RavEV. VW and BMW worked with Bosch for their egolf and I3. Ford did their own thing and GM tried to revive 20year old technology. Nikola has no future since they are relying on other manufacturers to engineer their vehicles since they have zero proprietary components. They basically bribed GM to keep them afloat on the backs of uneducated investors.
It’s like Microsoft buying TikTok because they have no clue how to lure young interest to their platforms
Wal*Mart was part of that too. Not too many young people choosing Wal*Mart. Hipsters refer to Walmart as evil, corporate greed. They would rather pay more at trendy stores like Whole Foods and Trader Joe's.
Watching CNBC coverage of Nikola, they frame it that there is no way to know who is right or how this will turn out. There are several Hindenburg allegations that have turned out to be true but the primary sound bite is that the truck was rolled down a hill for a promotional video. Nokola does not dispute that. Nokola also does not dispute they put their own logo over the logo of a supplier on a charge controller, proudly showing the part. They contend it was just for supplier confidentiality but that's as credible as a Trump news conference. It seems to me, we don't know how the SEC will find, as they have demonstrated they're pretty whacked, but we already know Nikola has been attempting to mislead people into thinking they had prototype components and a working prototype truck when they had neither. The revolutionary fuel cell has yet to be demonstrated, also. IMO, the best way to be mis-informed is to watch CNBC.
