fortune--2020-01-09--I’m a Millennial, and I Don’t Understand What Quibi Is Trying to Do

This article originally ran in Term Sheet, Fortune’s newsletter about deals and dealmakers. Sign up here.
Another day, another mega-round.
This time it’s a company that’s been around for two years without having launched a product to the public. Yep, it’s Quibi, the short-form, mobile-only video platform that finally plans to launch this April.
Quibi, which is short for “quick bites,” just announced an additional $400 million in funding for their venture, which is on top of the $1 billion they raised in 2018 from a star-studded roster of investors. They include Disney, Alibaba, NBCUniversal, 21st Century Fox, Lionsgate, Metro Goldwyn Mayer, Sony Pictures Entertainment, Viacom, and Warner Media.
So yeah, that’s basically like all of Hollywood.
Who’s behind Quibi? Media mogul Jeffrey Katzenberg and former eBay and HP CEO Meg Whitman. The pitch: “TV, but on your phone,” based on the idea that most of us spend hours and hours on our phones. So rather than full-length TV shows, the company will release its videos in “bite-sized formats of 10 minutes or less.” The service will have two pricing tiers — $4.99 per month with ads and $7.99 per month without ads.
Mobile streaming is hardly a new concept. People have been consuming short-form videos on Facebook, Instagram, YouTube, and Snapchat for a pretty long time. Not to mention that Quibi will be competing with Netflix, Apple TV Plus, Disney+, HBO Max, and NBCUniversal’s Peacock.
When Fortune’s Andrew Nusca asked Katzenberg last year how Quibi plans to fit into the saturated streaming economy, he explained passionately how Quibi’s different and doesn’t have competitors. (As a tech reporter, you hear this pretty much every day.)
“I don’t want to get defensive, but… you’re comparing apples to submarines,” Katzenberg said at Fortune’s 2019 Brainstorm Tech conference in Aspen, Colo. “You can’t get what we’re doing on a television set.”
I fall right in Quibi’s target demographic, which is users who are 25 to 35 years old, and I don’t watch TV. I primarily watch Netflix or random videos on my phone. But here’s the biggest problem that contributes to some of my personal skepticism: I use Facebook and Instagram regularly. Do I watch short-form video content on Facebook Watch, Instagram TV, or Snap Originals? Never. And that content is free.
Let’s look at some of the innovations that Quibi has in store. First, it’ll break up movies into several-minute chapters. This means a two-hour movie could take 12 chapters to play in its entirety.
Or, you know, I could just press pause on my regular two-hour movie and return to it later.
Secondly, Quibi revealed its “Turnstyle” feature, which will allow users to rotate their smartphone or tablet to watch content in both portrait and landscape modes to see a different perspective. Katzenberg says it “is unlike anything creators have had before.”
Realistically speaking, how many times do you rotate your phone while watching a video?
I’m willing to be wrong on this one, but I just can’t quite identify the problem that Quibi is trying to solve. Katzenberg is confident that there’s a need for well-produced, high-quality video content for your phone. “We’ll actually create the next chapter of film narrative,” he said in a 2019 Fortune feature. “Five or 10 years from now, we’ll look back and go, ‘There was the era of movies, there was the era of television, and there’s the era of Quibi.’ ”
But as the story noted, if Quibi can’t sign up customers who are willing to pay for a subscription, its clever approaches to content creation won’t really matter.
The strongest case I’ve heard for Quibi has been: “You don’t want to bet against Katzenberg.” Undeniably, he’s a legend who has been in Hollywood for more than 40 years and has more connections than I could imagine.
“Sorry. I’ve been doing this — I get to say this — I’ve been doing this before you all were fucking born,” Katzenberg said at CES yesterday.
For all this money and all this talk, I hope the future Quibi’s envisioning becomes reality.
Polina Marinova
Twitter: @polina_marinova
Email: polina.marinova@fortune.com
VENTURE DEALS
- Roofstock, an Oakland, Calif.-based online marketplace for investing in the single-family rental home sector, raised $50 million in Series D funding. SVB Capital led the round, and was joined by investors including Citi Ventures, Fort Ross Ventures, 7 Global Capital, Khosla Ventures, Bain Capital Ventures, Lightspeed Venture Partners and Canvas Ventures.
- Komodo Health, a healthcare data platform, raised $50 million in Series C funding. Andreessen Horowitz led the round, and was joined by investors including Oak HC/FT also and previous investors IA Ventures and Felicis Ventures. Read more at Fortune.
- Partnerize, a U.K.-based SaaS partner automation platform, raised $50 million in funding. Accel-KKR led the round.
- Vecna Robotics, a Cambridge, Mass.-based workflow orchestration and self-driving forklift provider, raised $50 million in Series B funding. Blackhorn Ventures led the round, and was joined by investors including Highland Capital, Fontinalis Partners, Drive Capital and Tectonic Ventures.
- Advantia Health, an Arlington, Va.-based provider of women’s healthcare, raised $45 million in funding from BlueMountain Capital Management.
- Kyruus, a Boston-based provider of search and scheduling solutions for health systems, raised $42 million in Series D funding. Venrock and Highland Capital Partners co-led the round, and was joined by investors including Providence Ventures and Salesforce Ventures.
- Soul Machines, a New Zealand-based developer of emotionally responsive avatars, raised $40 million in Series B funding. Temasek led the round, and was joined by investors including Lakestar, Salesforce Ventures, Horizons Ventures, and University of Auckland Inventors Fund.
- Corvus, a Boston-based provider of commercial insurance products, raised $32 million in Series B funding. Obvious Ventures and Telstra Ventures co-led the round.
- Outlier.org, a Brooklyn-based online education platform whose courses earn students transferable college credit, raised $11.7 million in Series A funding. GSV Ventures led the round, and was joined by investors including Harrison Metal, Tectonic Capital, and Jackson Square Ventures.
- Docket, an Indianapolis-based software-as-a-service platform for managing intelligent meetings, raised $1.5 million in seed funding. Allos Ventures led the round, and was joined by investors including High Alpha Capital, Elevate Ventures and Simon Equity Partners.
- Sea Star Beachwear, a New York-based creator of the water-friendly espadrille, raised $1.25 million in seed funding.
HEALTH & LIFE SCIENCES DEALS
- BioSkryb, a Durham, N.C.-based developer of genomic amplification technologies, raised $11.5 million in funding. Anzu Partners led the round, and was joined by investors including Wilson Sonsini Goodrich & Rosati.
PRIVATE EQUITY DEALS
- Insight Partners agreed to acquire Veeam Software, an Alpharetta, Ga.-based developer of backup and disaster recovery solutions, in a deal valued at approximately $5 billion.
- Imperial Dade acquired American Paper & Plastics, a City of Industry, Calif.-based supplier of food packaging products. Financial terms weren't disclosed.
- Freeman Spogli & Co. acquired Easy Ice, a Marquette, Mich.-based provider of commercial ice machine rental and related services. Financial terms weren't disclosed.
- Marlin Equity Partners acquired Yaro, a Chicago-based provider of benefits navigation and care guidance solutions. Yaro will be merged with Virgin Pulse, a Marlin portfolio company. Financial terms weren't disclosed.
- Copley Equity Partners made an investment in Gregory FCA, an Ardmore, Penn.-based public relations firm. Financial terms weren't disclosed.
- Galen Partners acquired Evolve Treatment Centers, a Los Angeles-based adolescent behavioral health services provider. Financial terms weren't disclosed.
OTHERS
- Bullhorn acquired Herefish, a St. Louis, Mo.-based provider of automation solutions for staffing firms. Financial terms weren't disclosed.
IPOs
- GFL Environmental Holdings, an Ontario, Canada-based waste management firm, updated its filing after cancelling its IPO. It previously said it would raise up to $2.4 billion in an IPO of 87.6 million shares priced at a range of $20 to $24 apiece. The firm posted $2.7 billion in revenue (pro forma) in 2018 and loss of $532 million (pro forma). BC Partners, Ontario Teachers, and GIC back the firm. It plans to list on the NYSE and TSX as “GFL.” Read more.
- Calisen Group, a British smart meters maker, is planning a London IPO that could value it at between 1.3-1.5 billion pounds ($1.69-1.95 billion), Reuters reports citing sources. KKR backs the firm. Read more.
- Phoenix Tree Holdings, a Beijing-based online marketplace for residential rentals, plans to raise $164 million (with 70% estimated bought by existing shareholders) in an offering of 10.6 million ADSs priced between $14.50 to $16.50 apiece. The firm posted revenue of $374.3 million and loss of $191.6 million in 2018. Tiger Global (20% pre-offering), Joy Capital (15.7%), CMC Capital Partners (9.4%), and Ant Financial (7.8%) back the firm. It plans to list on the NYSE as “DNK.” “Read more.”
- PPD Inc., a Wilmington, N.C.-based drug development and laboratory management service for biopharmaceuticals, filed for an $100 million IPO. It previously filed confidentially in November. The firm posted revenue of $3.8 billion and income of $96.3 million in 2018. Hellman & Friedman Capital Partners (56.7% pre-offering), Carlyle (23.8%), the Abu Dhabi Investment Authority (9.2%), and the Government of Singapore (9.2%) back the firm. It plans to list on the NYSE as “PPD.” “Read more.”
EXITS
- Graycliff Partners LP sold 901D Holdings, an Airmont, N.Y.-based service engineering and manufacturing company, to Curtiss-Wright Corporation (NYSE: CW) for $132 million.
- Effectual, which is backed by Catalyst Investors and Lumerity Capital, acquired JHC Technology, a public sector managed services company. Financial terms weren't disclosed.
PEOPLE
- ABS Capital Partners promoted Kim Kile to general partner.
- Stephane Etroy joined Ares Management Corporation (NYSE: ARES) as a partner and head of European private equity.
- Guidepost Growth Equity promoted Chris Cavanagh and Eugene Nogi to general partner.
- Brewer Lane Ventures named Martha Notaras as managing partner.
- Periscope Equity promoted Alex Friedman to principal.
- Anacapa Partners named Vincent Vo as a principal.
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fortune--2020-01-09--The Potential Upside of Meghan Markle’s Self-Imposed Exile

The House Just Approved a War Powers Resolution .
Here ’ s What That Means

This is the web version of the Broadsheet, Fortune’s daily newsletter for and about the world’s most powerful women. To get it delivered daily to your in-box, sign up here.
Good morning, Broadsheet readers! Women are the leads in more movies than ever, McDonald’s gets sued, and Meghan and Harry embark on a self-imposed exile. Have a terrific Thursday.
EVERYONE'S TALKING
- Meghxit. Prince Harry and Meghan Markle shook up the House of Windsor yesterday by announcing they would step back from their roles as ‘senior’ members of the royal family. They plan to split their time between the U.K. and North America, the place of Meghan’s birth.
The announcement caps a tumultuous period for the couple, who welcomed their first child Archie eight months ago and have engaged in battle with the U.K. tabloid press.
“After many months of reflection and internal discussions, we have chosen to make a transition this year to carve out a progressive new role within this institution,” the couple said in a post on Instagram. “It is with your encouragement, particularly over the last few years, that we feel prepared to make this adjustment.”
The self-imposed exile is considered unprecedented for the royal family, but it’s not wholly surprising given the rumors of rising tension between the couple and their closest relatives. Reports suggest the Duke and Duchess didn't give other members of the royal family a head's up. Buckingham Palace issued a frosty statement calling the decision "early stage" and saying that there are still a lot of details to figure out.
An especially interesting tidbit from the couple’s statement is their aim to become financially independent. In that regard, I, for one, am looking forward to the relaunch of The Tig, Meghan’s defunct lifestyle blog, which was likely ahead of its time.
Putting aside the jokes and can’t-look-away family drama, the announcement further cements Meghan’s status as an independent force within an institution defined by protocol. Of course, her background—an American, raised in California by her black mother—sets her apart from the rest of the monarchy, but so too has her emotional, open demeanor and subtle nods to female empowerment. She’s reportedly hugged the guards at Buckingham Palace despite being told not to; "I’m American. I hug,” she said. She described herself as a feminist in her official royal biography. She’s talked frankly about taboo topics like menstruation, and then there was The Wedding. The question now is whether the distance from Buckingham Palace will further embolden her public persona. Her enormous platform is unlikely to shrink, but perhaps the restraints of ‘senior’ royal life will.
Claire Zillman
claire.zillman@fortune.com
@clairezillman
Today's Broadsheet was produced by Emma Hinchliffe.
ALSO IN THE HEADLINES
- Pelosi's vote on power. The House of Representatives is set to vote today on a war powers resolution to limit President Trump's military actions in Iran. Rep. Elissa Slotkin, the freshman Democrat and former CIA analyst, authored the resolution. House Speaker Nancy Pelosi noted in her statement announcing the vote that Trump ordered the Iran strike without consulting Congress. NBC News
- Leading ladies. More movies than ever—40%—featured female lead characters last year. The milestone for female protagonists can likely be credited to an increase in women working as writers and directors; films with women in those behind-the-scenes roles were far more likely to feature female protagonists. Sixty-eight percent of female lead characters, however, were white. Guardian
- Short-form details. Meg Whitman and Jeffrey Katzenberg revealed more details about their shortform video platform Quibi at the Consumer Electronics Show. The service will launch April 6, offer more than 175 original shows in its first year, release new content every weekday, and cost $4.99 a month with ads or $7.99 a month without. CNBC
MOVERS AND SHAKERS: McDonald's named SVP, corporate strategy and business development Lucy Brady to the new role of chief digital customer engagement officer. Lululemon named Uber's Nikki Neuburger chief brand officer. NBC News White House correspondent Kristen Welker will become co-anchor of Weekend TODAY, replacing Sheinelle Jones. Healthcare investment bank SVB Leerink hired Stephanie Davis Demko of Citibank as managing director and senior research analyst to cover healthcare technology and distribution.
IN CASE YOU MISSED IT
- Spon con. A Teen Vogue story featuring female employees at Facebook ignited a controversy yesterday. The laudatory piece was headlined "How Facebook Is Helping Ensure the Integrity of the 2020 Election"—despite ongoing concerns about effects of the social network on elections. Some suspected the story was a piece of sponsored content paid for by Facebook; it was eventually labeled as such, then had that label removed, then was taken down. Facebook COO Sheryl Sandberg shared (then deleted) the story on her own Facebook page, praising the "five incredible women protecting elections on Facebook." Teen Vogue parent Condé Nast, apologized for the "confusion" but did not elaborate. Business Insider
- Une fête gone wrong. A new focus of the Carlos Ghosn story: his wife Carole Ghosn's 50th birthday party at Versailles in 2016. Ghosn's use of the palace is under investigation in France because the venue receives financial support from his former employer, Renault SA. Ghosn defended throwing the party there in his press conference yesterday. Bloomberg
- Discriminatory demotions? McDonald's Dallas-based senior directors Vicki Guster-Hines and Domineca Neal sued the company this week, alleging that they were demoted because of "discrimination and an allegedly hostile climate for black executives and franchisees." They say racial discrimination intensified in 2015 after new executives, including recently ousted CEO Steve Easterbrook, joined the company. McDonald's reduced the number of officer-level positions in an overall restructuring, and a spokesperson told the WSJ that "45% of the company’s corporate officers are people of color, along with all of its 10 U.S. field vice presidents." Wall Street Journal
- Complicated romance. The Romance Writers of America trade group is in chaos after a writer criticized a 1999 romance novel as racist, prompting that book's author to file a complaint. Many other writers then objected to how the RWA handled the situation, dropping out of the group's annual awards in protest. Romance publishing is a billion-dollar industry; this story has a good rundown of the complicated situation with many players: Washington Post
ON MY RADAR
Inside the Miami wedding of soccer stars Ali Krieger and Ashlyn Harris Vogue
Lizzo makes history as the first woman to headline Bonnaroo Teen Vogue
Ruth Bader Ginsburg declares she’s ‘cancer free’ Washington Post
QUOTE
"I feel like I was supposed to go through everything I’ve gone through."
-Selena Gomez in a WSJ. Magazine profile


fortune--2020-01-09--‘Abstract, Unclear or Baseless:’ Japan Strikes Back After Ex-Nissan Boss Ghosn Slams Justice System

Japan battled to restore its image on Thursday after former auto executive Carlos Ghosn blasted the country’s legal system in a marathon press conference following his escape to Lebanon.
Justice Minister Masako Mori held an unusual briefing in the early morning hours in Tokyo, and then gave a second press conference later on to rebut what she said were mostly “abstract, unclear or baseless” criticisms of the country’s legal system. She was scathing in her descriptions of Ghosn’s behavior after he told the world he skipped bail and fled Japan because he didn’t think he would get a fair trial.
“He has been propagating both within Japan and internationally false information on Japan’s legal system and its practice,” Mori said in her first briefing. “That is absolutely intolerable.”
Ghosn, the former head of Nissan Motor Co. and Renault SA, used the first press conference since his dramatic escape to blast what he called “hostage justice.” Speaking in four languages, he offered a point-by-point rebuttal of the charges against him and accused Japanese prosecutors, government officials and Nissan executives of conspiring to topple him to prevent a further integration of the Japanese carmaker with Renault.
In response to Ghosn’s assertion that Japan breached his human rights by preventing him from seeing his wife, Mori said such measures were only used in cases of a flight risk or when there was a danger of evidence being concealed or destroyed. Mori also lauded Japan’s police, judges and prosecutors for building what she said was the “safest country in the world.”
Mori said she was aware of criticism of Japan’s criminal justice system, and said authorities are taking steps to improve it. “It is my strong hope that he engage in all possible efforts to make his case within Japan’s fair criminal justice proceedings, and that he seek justice rendered by a Japanese court,“ Mori said.
The Tokyo District Public Prosecutors Office, which rarely makes any public comment, posted an English statement on its website saying Ghosn had only himself to blame for his strict bail conditions. It vowed to try to bring him to justice in Japan. At a regular scheduled briefing Thursday, Tokyo Deputy Chief Prosecutor Takahiro Saito pushed back against many of Ghosn’s complaints about the “inhumane” conditions of his confinement.
“Ghosn gave the impression he was questioned for a total of eight hours a day, but that’s not true,” Saito said. The former CEO was questioned on 70 of the days he spent in jail, about half the total, with each session lasting an average of four hours, he said. He met with his legal counsel “almost every day” he was there, altogether more than 120 times, Saito said.
Chief Cabinet Secretary Yoshihide Suga also piled in, calling Ghosn’s comments one-sided and not persuasive.
Striking Back
At his news conference in Beirut, Ghosn refrained from accusing specific people in the Japanese government of any wrongdoing, citing the need to avoid creating friction between Lebanon and Japan. He also said he didn’t think Prime Minister Shinzo Abe was involved.
Abe has avoided making any public comments about Ghosn. Kyodo News reported on Wednesday that he told a party lawmaker at a dinner in Tokyo ahead of Ghosn’s news conference that he had wanted the situation “to be sorted out within Nissan in the first place.”
The head of a foreign policy panel in Abe’s ruling Liberal Democratic Party accused Ghosn of spreading “fake news.”
“We have our dignity as a country, and we need to have people understand that we have a proper legal system that doesn’t ignore human rights at all,” said Yasuhide Nakayama, who is also a former vice foreign minister.
Abe’s government has sought cooperation from Lebanon to bring Ghosn back but Japan doesn’t have an extradition treaty with the country. Lebanese President Michel Aoun pledged to work on the issue in a meeting Tuesday with Japan’s ambassador in Beirut, the Japanese foreign ministry said in a statement.
Lebanon’s prosecutor issued a travel ban for Ghosn after questioning him Thursday on two cases, including the allegations of financial misconduct included in an Interpol red notice that police received this week, according to the state-run National News Agency. Ghosn also gave testimony on a lawsuit filed locally that he entered Israel in 2008, a criminal offense in the country. Lebanon and Israel are technically in a state of war.
The restriction on international travel is in line with legal practice in Lebanon. Ghosn said at the briefing Wednesday that he wanted to clear his name and would stand trial “in any country where I believe I can receive a fair trial.”
More must-read stories from Fortune:
—7 M&As that defined a decade of dealmaking and reshaped the economy
—3 charts that prove patent power is tilting in Asia’s favor
—Rwanda is bringing tech buzz to Africa
—These 10 journalists deserve justice in 2020
—2020 Crystal Ball: Predictions for the economy, politics, technology, etc.
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-01-09--Plant-Based Meats Are Eating More Menu Space And It’s Not Just Because of Veganuary

This is the web version of The Loop, Fortune’s weekly newsletter on the revolutions in sustainability. To get it delivered daily to your inbox, sign up here.
Good morning and, if it’s not too late, happy New Year.
I’ve spent the first week of the year back in my native London, which I’ve been largely absent from for the past five years. Coming home, I’ve been surprised by some changes.
First, the U.K. is going cashless at a clip, to the point that coin slots at self-service machines have been taped up in my local Tesco (which could be the winds of change, or could be shoddy maintenance). But the change that has struck me the most is written on the menus, where plant-based alternatives are being awarded more and more space in a complete reversal from the pro-meat trend when I was last living here.
I left the U.K. in 2015, when the country was at peak meat, with trendy BBQ joints decked out in neon lights and packing every corner. Coming back: McDonalds, KFC, and Burger King have all launched plant-based options (with varying success). High street bakery Greggs, famed for sausage rolls and steak bakes, has launched vegan alternatives; the former was so successful the company is sharing out £7 million in staff bonuses to celebrate.
It’s not just because its “Veganuary,” which this year reportedly has 300,000 participants signed-up. Retail sales for meat alternatives are up, too, surging 18% last year to around £470 million and is predicted to hit £658 million by 2021.
Evidently there’s growing clout behind the Green Pound, which will actually make the shift more sustainable as businesses are incentivized to cater towards the movement. But beyond the economics, a societal shift is at work.
Last week a U.K. judge ruled that ethical veganism—which advocates the avoidance of all products that harm animals—should be protected under law as a philosophical belief. For context, the ruling came during an employment tribunal brought by a worker who alleges he was fired due to his commitment to ethical veganism.
The worker was let go after disclosing that his employer invests pension funds in firms that carry out animal testing. The man’s former employer, however, says he was dismissed for gross misconduct (for more on the constraints of employee activism, see below.)
The ruling, coming from a lowly tribunal, does not equate a change to U.K. law but it does set an interesting precedent for how the country should respond to vegan concerns. Remember four years ago, when the Bank of England released a non-vegan bank note? It’s a good thing the U.K.’s going cashless, anyway.
I’ll be back in Hong Kong next week, where I’ll get back to regular reporting. Until then, more below.
Eamon Barrett
Eamon.barrett@fortune.com
CARBON COPY
Still burning
Australia’s tourism board pulled a $15 million advertising campaign promoting holidays Down Under after complaints that the campaign ignores the current bushfire crisis ravaging the country. At least 26 people have died in the fires which have burned since September. Thousands have lost homes as over 12 million acres of land—an area larger than Scotland—is in embers. The government has been criticised for its slow response, only last weekend announcing a new agency to help people who have lost homes in the blaze. Prime Minister Scott Morrison, who absconded for a holiday as the fires raged in December, has warned the crisis could continue for months. New York Times
No fishing
China implemented a ten-year ban on fishing along the Yangtze river—Asia’s longest river, connecting Tibet to Shanghai—on January 1. The decade-long ban is expected to affect 280,000 fishermen, who the government says will be provided with social securities and alternative jobs. But the move, aimed at reviving inland fisheries, comes too late for the giant Chinese paddlefish, which was declared extinct late last year, seen off by overfishing, river damming and heavy pollution. Xinhua
No bags
Thailand began the year with a prohibition on plastic bags across all major stores as the government continues a push that began last year for the complete ban on single-use plastic bags by 2021. Thailand’s Ministry of Natural Resources and Environment says that a voluntary scheme to ditch plastic bags resulted in 2 billion fewer disposable bags used last year, and Thai shoppers are getting pretty creative with their alternative carrier choices, toting everything from wheelbarrows to buckets. Reuters
Deactivated
At least two Amazon employees have alleged the e-commerce giant threatened to fire them for giving media interviews that were critical of the company’s contribution to climate change. Amazon operates a policy that prohibits employees from giving media interviews without obtaining prior permission. The staff group Amazon Employees for Climate Justice (AECJ) says Amazon updated its communications policy to prevent staff from speaking publicly last September, the day after AECJ announced a strike to protest Amazon’s carbon emissions. The Guardian
IN CASE YOU MISSED IT
MGM Resorts CEO: What Happens in Vegas No Longer Stays in Vegas by Jim Murren
Consumers Are Turning Away From Real Fur, but Faux Fur Is Not a Perfect Fashion Fix by Kristin Larson
Why This 100% Sustainable Icelandic Sea Salt Based on Historic Production Methods Is Becoming a Chef Favorite by Regan Stephens
How Elon Musk Built a Tesla Factory in China in Less Than a Year by Bloomberg
‘They Must Scale Up:’ Greenpeace Ranks China’s Tech Giants on Renewable Energy by Naomi Xu Elegant
CLOSING NUMBER
0.6-degrees Celsius
Last year was the second hottest year on record, according to the EU’s primary climate monitoring outfit, the Copernicus Climate Change Service, with temperatures averaging around 0.6-degrees Celsius above the mean temperature for the period between 1981 and 2010. For Europe specifically, 2019 was the hottest year ever but globally the hottest year on record remains 2016, although only by a 0.04-degree lead. No surprise, the previous decade as a whole was the hottest on record, too, with the final five years warmer than the first. Copernicus director Jean-Noel Thepaut said, “These are unquestionably alarming signs.”


fortune--2020-01-09--How Nissan-Renault Became a ‘Masquerade of an Alliance,’ According to the Man Who Built It

Former Nissan chief Carlos Ghosn’s breathtaking fall from grace over accusations of financial impropriety, followed by months of solitary confinement and house arrest in Japan, caught the public’s imagination. Now, after a spectacular late-December escape from Japan, the former auto industry titan who oversaw the Renault-Nissan Alliance for roughly 15 years is seeking to clear his name—and lay blame.
During an over-two-hour press conference Wednesday he focused on what he called a rigged Japanese justice system. In the process, he also spoke at length about what he described as the dire state of the Franco-Japanese automotive alliance, the conspiracy against him that grew right under his nose at Nissan’s Yokohama headquarters, and his frustration with the missed opportunity to engineer a tie-up with European rival Fiat Chrysler (FCA).
Here are five key takeaways from Ghosn’s statements, made from Beirut where the Lebanese national currently plans to reside for now:
1. The alliance began to crumble after Macron power grab
Once thought to be lasting, the foundation of the Alliance started to rot after France gifted itself double voting rights in Renault, as well as other French corporations, in 2015. A driving force behind the enabling Florange Act, named after a Mittal Steel plant the government threatened to nationalize, was up-and-coming economy minister Emmanuel Macron, now France’s president.
“This left a big bitterness with our friends in Japan, not only with management but with the government, because they considered it unfair that Nissan had 15% of the shares in Renault and zero votes, and France had 15% and double the votes,” Ghosn said. “This is when the problem started.”
2. A holding company, rather than a merger, was planned to balance competing interests
Much of the speculation surrounding his fall from grace centered around Ghosn’s purported plans of a Renault-Nissan merger—which some saw as the genesis of the plot to remove him.
It was not quite that way, he told reporters on Wednesday. Rather, he wanted to preserve a strong degree of independence for each side with separate headquarters and executive committees—one in Japan and the other in France. This would be accomplished by issuing stock in a “new Alliance” holding company led by a single board for which investors would swap their shares in Nissan and Renault, he indicated.
“It was not a full merger,” he told reporters. “I was trying as much as possible to overcome the resistance coming from the Japanese who wanted to be very autonomous, and on the other side the French, that wanted a full merger. It was a very good balance.” Instead, he alleged, fractious elements within Nissan decided it was easier to just get rid of him.
3. FCA was on verge of joining Ghosn’s Alliance
For the auto majors, scale is key as the biggest manufacturers push deeper into existing markets and into development of electric vehicles. In recent years, one of the automakers most determined to partner up has been Fiat Chrysler Automobiles (FCA). Its on-again-off-again courtship with Renault and Ghosn were hardly a secret.
That’s a moot point today.
In December, Groupe PSA and FCA forged a tentative agreement to merge. Such a deal might never have happened were it not for the plot by the Japanese to remove Ghosn, Ghosn himself claims.
Ghosn told reporters he was in the process of recruiting FCA as the fourth pillar to Renault-Nissan-Mitsubishi when he was arrested. He claimed the two sides were just weeks away from securing an agreement with FCA Chairman John Elkann in a last round of talks scheduled for the start of 2017.
“I had a planned meeting in January for a kind of final conclusion of the deal,” he said at the press conference. Instead, he found himself remanded into custody in Kosuge Detention Center awaiting trial. FCA, despite a brief public dalliance last May, chose to go with PSA. “The Alliance missed the unmissable, which is Fiat Chrysler. It’s unbelievable, how can you lose this huge opportunity to become the dominant player in this industry?”
4. Nissan conspirators named; Japan’s Abe and Renault spared
Ghosn directed the full force of his attack at the brass residing in Yokohama HQ. There, he claimed, plotters including his own successor as CEO, Hiroto Saikawa, had collaborated illegally with prosecutors to convict him on bogus, trumped-up charges. Ghosn fingered several other Nissan execs as well, including Masakazu Toyoda, a former veteran trade ministry official heading the board’s nomination committee, as the cabal’s key link to the government. To protect Lebanese interests, Ghosn stopped short of naming co-conspirators in Tokyo, but added he did not believe it reached as high as Prime Minister Shinzo Abe.
Asked if Renault bore any blame, Ghosn explicitly excluded his former employer. “Everything that happened to me in Japan is linked to Nissan. Renault is not in the loop, and I don’t intend to deviate attention from the main [culprit].”
5. Alliance exists only on paper. But, a steady hand could still save it
Ghosn argued his Japanese enemies were right to believe that by eliminating him they effectively got rid of French influence as well. “When you see exactly what is happening today, Renault has very little influence on what’s going on at Nissan,” he said. The result was a market cap decrease in Nissan of over $40 million a day since his arrest, and a €20 million daily decline at Renault, despite the overall automotive sector on average increasing in value by 12%.
The Brazilian-born executive was merciless in his judgement of the post-Ghosn Alliance, “There is no more growth, there is no more increase in profit, there is no more strategic initiative, there is no more technology, and there is no more Alliance. What we see today is a masquerade of an Alliance,” said Ghosn, adding “It’s not going to go anywhere.”
In order to salvage the auto partnership, the world’s second biggest in terms of vehicles sold (in 2018), Ghosn said a strong and steady hand on the tiller was needed—i.e. someone like himself—to offset the centrifugal forces inherent in the two organizations. “Consensus doesn’t work. You have to make sure that you force people to go for synergies (…) if you leave them to themselves and you say it’s consensual, nothing happens.”
More must-read stories from Fortune:
—That great 2019 S&P rally? It has big warning signs for 2020
—The relationship between geopolitical crises and market outcomes isn’t simple
—Why you actually may want to buy “bears” in a bull market
—5 CEO exits that sum up the memorable business year that was 2019
—What a $1,000 investment in 10 top stocks a decade ago would be worth today
Subscribe to Fortune’s forthcoming Bull Sheet for no-nonsense finance news and analysis daily.


fortune--2020-01-09--In 2020, Investors Have Lost Their Bearings

Good morning.
Confused about where the economy is headed this year? Take heart—you are not alone.
Fortune teamed up with Civis Analytics to poll the “smart money”—some 1300 investors—and this is what we found:
58% of them think a recession is likely in 2020;
76% think the stock market will rise in 2020. That’s after rising nearly 30%, as measured by the S&P 500, last year.
Got that? You don’t need to be a data scientist to figure out that roughly a third of investors think the market will go up, even though the economy is going down.
I think investors have lost their bearings. And most corporate CFOs seem to agree with me. Deloitte’s quarterly CFO Survey is out this morning, and 77% of the CFOs who responded said they believe the market is overvalued.
One company that certainly adds to that narrative is Tesla, which ended the day yesterday with a market cap of $89 billion—more than GM and Ford combined! No wonder Elon Musk is dancing (this is worth watching.)
But Musk was only the second-most-watched car executive in the news yesterday. The first was Carlos Ghosn, who gave a press conference after his dramatic escape from Japan’s criminal justice system in a box. Ghosn didn’t provide new details on his Mission Impossible journey; he just railed against the Japanese criminal justice system. He may have a case—his treatment seemed remarkably harsh, and the conviction rate in Japan seems unreasonably high. But it’s hard to believe Japanese authorities would have gone this far if they didn’t have a pretty good case, too. As Bloomberg’s Matt Levine wrote: “Surely almost everyone who has ever been convicted of a crime—certainly of a complicated nuanced financial crime—at trial anywhere in the world thinks that they have not gotten a fair trial.” Does that give them the right to sneak away in a giant box?
More news below.
Alan Murray
@alansmurray
alan.murray@fortune.com
TOP NEWS
De-Escalation?
The U.S. and Iran appear to be backing down from outright conflict, after a press conference Wednesday by President Donald Trump signaled no new attacks on Iran, after missile strikes by the country on Iraqi airbases housing American forces produced no casualties. However, Trump said the U.S. would move ahead with "punishing economic sanctions." On Thursday morning, markets in Europe rallied on the news, while oil prices erased earlier gains. WSJ / FT
IAG Chief Steps Down
Willie Walsh, the chief executive of the global airline group IAG, said he would step down after 15 years in the job. The Irishman will depart in March and be replaced by Luis Gallego, who heads Spain's Iberia carrier, part of IAG. The group recently saw its first ever pilot strike at British Airways in September. FT
Boeing's 'Money Spinner'
The Boeing 737 disaster in Tehran is still drawing questions about what actually caused the Wednesday crash that killed everyone on board. But for Boeing, the crash hits at not just a tense time, but directly at a beloved brand: the 737 is the company's 'money spinner' plane, a workhorse of the skies. “It's the most successful plane in the history of aviation,” one expert said. Fortune
The U.S.-Iran Conflict Is Hitting Aramco
The recent tensions between the U.S. and Iran over the killing of Qassem Soleimani are putting one company in the cross hairs: Saudi Aramco. After listing in Saudi late last year, the oil giant has seen its shares fall sharply following the attack. The recent drone attack on its oil field and a refinery in September, which knocked out half the Kingdom's crude supply, is clearly fresh in investors' minds. Fortune
AROUND THE WATER COOLER
China Gets Closer to Identifying Mysterious Illness
Chinese researchers say they have identified a new "coronovirus", a pneumonia-like illness that has sickened dozens of people in the central city of Wuhan. It appears to be spread to humans via animals and seems less likely to spread between humans—but few other details are public. Memories of the SARS epidemic and its coverup have caused wariness about the cause of the illness—and the official government response. New York Times
End of the 'Double Irish'
This month marks the end of the so-called 'Double Irish'—a much-used tax avoidance strategy that involves setting up operations in Ireland to take advantage of its low corporate tax rates. Under pressure from the OECD, the EU, and the U.S., Ireland closed the loophole, while a similar one in the Netherlands—the 'Dutch sandwich'—has also shut. But with companies searching for new options to keep their taxes low, other countries or regions may just step in to fill the gap. Fortune
ClassPass Hits Unicorn Status
ClassPass, the workout class app, is the latest female-founded startup to reach a $1 billion valuation, after receiving $285 million in funding from backers that have also funded Peloton and Equinox. Founded in 2013 by Payal Kadakia, who now serves as executive chairman, and currently led by CEO Fritz Lanman, the company has expanded across Europe to 28 countries worldwide, and is working on expanding its offerings of wellness services like massages. Fortune
'Financial Independence'
Everyday people know what financial independence means. But what does it mean for a Royal, or for the 'former senior Royals' that Prince Harry and Meghan Markle will soon become? Most of their expenses will still be covered by the Duchy of Cornwall, a vast real-estate portfolio controlled by Prince Charles. The couple also have private wealth: Markle has a private fortune, and Harry has inherited shares of multi-million pound estates from both his great-grandmother, the Queen Mother, and his mother, Princess Diana. The Times
A note from CEO Daily: The future of Fortune is coming. This month, we will be launching (deep breath) a new site and app, a new video hub, a new magazine, plus a subscription package that offers the best of business, all in one place: strategic insights, deep-dive stories, and exclusive access to what the C-suite is thinking. We'll keep you updated on the launch, and you can also tell your friends to keep tabs on developments by leaving their email addresses here.
But that's not all! Fortune is also getting ready to launch a raft of new newsletters, two of which you can sign up for in advance. Fans of the Sino Saturday edition of CEO Daily will be excited to learn that Clay Chandler and the Hong Kong team are preparing a daily newsletter on business in China, called Eastworld. And our Rome-based ace, Bernhard Warner, will write a daily newsletter on finance news, awesomely named Bull Sheet.
This edition of CEO Daily was edited by Katherine Dunn.


fortune--2020-01-09--WeWork Is Hitting the Brakes in New York and London

WeWork’s days of breakneck expansion are over, at least for now.
New leases by the flexible office firm nosedived in New York and London, its top two markets, in the final quarter of last year, CoStar Group Inc. data show. It signed just 64,000 square feet (5,946 square meters) of space in Manhattan, the lowest in more than five years, while the 49,000 square feet in London was the least since the U.K.’s Brexit vote in the second quarter of 2016.
The sharp brake on expansion followed the company’s decision to shelve a planned initial public offering in September last year and its subsequent rescue by major backer Softbank Group Corp., which agreed to take majority control of the company the following month.
We Co., WeWork’s parent, expanded rapidly in New York and London, becoming both cities’ largest private-sector tenant thanks to piles of venture funding and a founder focused on breakneck growth. While that helped catapult the firm to briefly become America’s most richly valued private start up, it also sparked intense scrutiny about the sustainability of that growth which contributed to the ouster of founder Adam Neumann.
The sharp slowdown in leasing in the three months through December follows a surge in new signings in the run-up to the company’s planned IPO, as it sought to present investors with a compelling growth story.
“Following a month of record new building openings in December, WeWork continues to grow our community globally, including in top markets like New York and London,” a spokeswoman said by email. “The company is focused on profitable growth and expects to expand through new leases as well as asset-light strategies such as joint ventures and management agreements.”
WeWork’s new-found caution has failed to significantly dent leasing volumes in the world’s top office markets, as technology companies like Amazon.com Inc. and Apple Inc. continue to expand their footprints.
Still, the firm’s travails have prompted a wider slowdown in the expansion of the flexible office market that had become a major source of demand for new buildings, according to Victor Rodriguez, an associate director for analytics at CoStar.
“The growth-at-all-costs model has largely been abandoned,” Rodriguez said. “Firms in this sector are now focused on making a profit rather than opening a new location.”
More must-read stories from Fortune:
—7 M&As that defined a decade of dealmaking and reshaped the economy
—3 charts that prove patent power is tilting in Asia’s favor
—Rwanda is bringing tech buzz to Africa
—These 10 journalists deserve justice in 2020
—2020 Crystal Ball: Predictions for the economy, politics, technology, etc.
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-01-09--Cabo’s Newest Luxury Resort From Ritz-Carlton Favors Tranquility Over Nightlife

Los Cabos in Mexico—a sun-kissed, beachy region encompassing Cabo San Lucas and San Jose del Cabo—has long built a reputation around a thriving nightlife: American vacationers seeking a beach destination for a quick spell, especially nearby Los Angelenos, dancing on hotel rooftops and snapping selfies to the latest rhythmic club anthem.
But the Ritz-Carlton Reserve’s newest resort, Zadún, which opened in November in San Jose del Cabo, wants its guests to party less and find tranquility and rest instead.
Set on a natural slope with panoramic views of the Sea of Cortez, Zadún is surrounded by three golf courses designed by Greg Norman and Jack Nicklaus. The resort offers 115 guest rooms, suites, and 42 two-story villas—all of which include their own private plunge pool, as well as indoor and outdoor showers.
Prices for an 807-square-foot one-bedroom start at $664 per night—each with their own plunge pool as well as indoor and outdoor showers—and top off at nearly $2,300 an evening for the Grand Reserve Villa: a vast 6,000-square-foot oceanfront abode with two bedrooms, two full bathrooms, two half-bathrooms, five lounges, a pool, a hot tub, private kitchen, and personal gym.
The resort includes 115 guest rooms, suites, and villas—all of which include their own private plunge pool, as well as indoor and outdoor showers. Ritz Carlton Zadun
“We always want to take the design deeper, so that it is elegant and inviting, but also authentic to the area,” explains Lisa Holladay, global brand leader for the Ritz-Carlton. “Guests who visit the hotel will see the work of artisans from across Mexico, handwoven textiles and art that bring Mexico’s culture to life. The goal is always to offer our guests an experience that will be both exceptional and inspirational, and one that will leave an indelible mark.”
The guest rooms serve up a contemporary take on Mexican design that showcases the talent of handcrafters from regions throughout Mexico, including Campeche, Jalisco, Mexico City, Oaxaca, Yucatán, and Puebla. Conceived by interior design firm Uribe Krayer, each room sports a careful curation and combination of various types of wood and stone. For the furnishings, communities of weavers created handwoven textiles for the pillows, while a unique framed textile serves as one of the primary works of art in every room.
Signature spa treatments include hand-blended body scrubs made with tamarind, salt, and other local ingredients, along with the templo caliente—a ritual that begins with a traditional energy-cleansing ceremony followed by a hot botanical scrub and cool outdoor shower. Ritz Carlton Zadun
Zadún’s spa was created to help hotel guests achieve a “positive transformation,” according to Ritz-Carlton. To that end, signature treatments include hand-blended body scrubs made with tamarind, salt, and other local ingredients. The “templo caliente” ritual begins with a traditional energy cleansing ceremony followed by a hot botanical scrub and cool outdoor shower. The spa’s Savasana Sound Room is used for all of the treatments, using sound therapy to create a state of deep meditation.
Zadún offers four restaurants and an agave bar, where guests can enjoy artisan dishes and drinks highlighting local flavors and textures from Puerto Los Cabos and other regions throughout Latin America. Humo, for instance, is a rustic, refined, dinner-only grill with a global selection of wines; El Barrio highlights authentic street food by day and innovative Mexican cuisine at night. (The resort will also host hands-on culinary festivals, where guests pick ingredients and learn to cook traditional Mexican dishes.) Meanwhile, guests can also enjoy carefully crafted cocktails at Equis or the agave bar Candil.
Inside Humo, an on-premise Latin American grill with dishes, including chorizo and oysters, prepared over open flames and presented in a rustic, refined setting. Ritz Carlton Zadun
Holladay points to the Ritz-Carlton Reserve’s “Tosoanis” as a resort highlight. This team of personal attendants, or veritable butlers, are experts in different areas, such as art or culinary, and they work with guests to create a stay that’s more personalized to each guest’s interests.
“They [Tosoanis] can be described as dream watchers or dream keepers, which is fitting, because their level of care is tangible and is a big part of what places Zadún in a league of its own,” Holladay says.
Architectural elements were inspired by its desert-by-the-sea locale, with furniture, artworks, textiles, and decorative objects that integrate the authentic traditions of Mexico’s rich craftsman culture. Ritz Carlton Zadun
Zadún is the fourth Ritz-Carlton Reserve location—a brand extension of the original Ritz-Carlton properties focused on offering guests hospitality experiences in remote locations around the world where guests can experience a deeper immersion into the culture of the destination they are visiting. Existing Reserve locations include Phulay Bay in Thailand; Ubud, Indonesia; Krabi, Thailand; and Dorado, Puerto Rico.
To that end, the hotel group’s Ambassadors of the Environment Program worked with Jean-Michel Cousteau’s Ocean Futures Society to build out educational programming that highlights regional wonders, such as whale sharks and manta rays, while also teaching visitors about preserving our environment.
“We want the Reserve experience to be truly special, even transformational,” Holladay says. “With the blending of the desert and the sea, and the culture of the area, everything felt right when we set out to create this Reserve.”
More must-read stories from Fortune:
—This Vegas casino just completed Sin City’s most expensive renovation ever
—Escape the Game of Thrones crowds and enjoy a luxury Croatian vacation in Dubrovnik
—Your modern weekend away meets the Old West in this sleepy California town
—Mexico’s most enticing getaway: San Miguel de Allende
—This hotel is made up entirely of tiny houses
Follow Fortune on Flipboard to stay up-to-date on the latest news and analysis.


fortune--2020-01-09--British Airways Empire-Builder Willie Walsh Is Stepping Down as IAG CEO

Willie Walsh, the pilot who built European airline giant IAG SA through a series of acquisitions, will retire, to be replaced by Luis Gallego, head of Spanish arm Iberia.
Walsh, 58, will stand down from the CEO role and the board in March and formally retire at the end of June, the company said Thursday. He led British Airways, and successor IAG, for 15 years.
At British Airways, Walsh faced down unions to cut costs and boost earnings before leading the purchase of Iberia in 2011, establishing IAG to take on Air France-KLM and Deutsche Lufthansa AG, which had already grown through acquisitions.
IAG added Aer Lingus and no-frills units Vueling and Level, consolidating its position as one of Europe’s most profitable carriers despite competition from low-cost rivals like Norwegian Air Shuttle ASA. He agreed last year to buy Air Europa for 1 billion euros ($1.1 billion), boosting Madrid’s status as a top hub and taking IAG’s fleet beyond 600 planes.
“Willie has made IAG the success it is today, undoubtedly one of the greatest airline groups in the world,” said John Strickland, director of JLS Consulting in London. Gallego, 51, is “a solid choice” as his successor, having transformed Iberia from a carrier beset with labor strife to one of Europe’s top operators.
IAG shares rose 1.1% to 625.10 pence by 10:57 a.m. in London trading, bringing the gain over the past year to 18%.
The group’s chairman, Antonio Vazquez, said Walsh has been “the main driver of this unique idea that is IAG,” a reference to a corporate structure designed to foster takeovers under a central holding company, avoiding the national clashes that are often a barrier to airline consolidation.
The decision to appoint Gallego means British Airways chief Alex Cruz has been overlooked for the top job. Cruz took over at the U.K. carrier in 2016, having previously been CEO at Vueling.
Gallego held various positions at Spanish airlines and entered the IAG fold via Clickair, which he helped found and which was acquired by Vueling, where he became chief operating officer. He later led Iberia’s regional arm before becoming its CEO in 2013. A new head for Iberia will be announced in due course, the company said.
More must-read stories from Fortune:
—7 M&As that defined a decade of dealmaking and reshaped the economy
—3 charts that prove patent power is tilting in Asia’s favor
—Rwanda is bringing tech buzz to Africa
—These 10 journalists deserve justice in 2020
—2020 Crystal Ball: Predictions for the economy, politics, technology, etc.
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-01-10--Iran Demands Proof After Western Governments Claim Iranian Missile Downed Passenger Jet

Tesla Has Delivered Its First China-Made Cars .
Now It ’ s Time to Face the Competition

Iran accused Western governments of engaging in “psychological warfare” in claiming the Boeing Co. jet that crashed near Tehran on Wednesday was brought down by a missile, as the tragedy became further embroiled in geopolitical tensions.
“If they are certain and have the courage, they should share any finding that has scientific and technical backing,” Ali Abedzadeh, head of Iran’s Civil Aviation Organization, said in a televised briefing Friday.
The comments intensify a standoff over the crash, which came hours after Iran struck at U.S. bases in Iraq in response to the killing of a top general. Canada, the U.K. and Australia all said they have intelligence showing the plane was shot down, while U.S. sources have said two surface-to-air missile launches were detected soon after the Ukrainian jet took off, followed by an explosion.
Investigating civil air disasters typically draws on close cooperation between manufacturers, regulators and the country where the crash occured. Iran has invited Boeing and investigators from countries including the U.S. to help probe the crash, which killed 176 people, but indicated it won’t seek American assistance with decoding the 737-800’s black boxes. Instead, it will turn to Russia, Ukraine, France or Canada if it needs aid extracting data. The U.S. National Transportation Safety Board said it’s monitoring the situation.
Speculation about Iran downing Flight PS 752 in error has been further fueled by a video purportedly showing a bright dot streaking toward the plane, followed by a flash, along with reports that missile debris was found near the scene.
The jet’s flight-data and cockpit-voice recorders will be examined Friday in Tehran, Abedzadeh said, adding that claims about what happened should be considered speculation until all information is retrieved. Hours after the tragedy, Iran claimed that a technical error was the most likely cause for the crash.
More than a third of passengers on the jet were from Canada, where Prime Minister Justin Trudeau said Thursday intelligence from multiple sources, including allies, “indicates that the plane was shot down by an Iranian surface-to-air missile.” He added that “this may well have been unintentional.”
U.K. Prime Minister Boris Johnson and his Australian counterpart Scott Morrison also said the evidence points to in that direction. In Ukraine, President Volodymyr Zelenskiy said while a missile hit hadn’t been ruled out, it also hadn’t been confirmed, “as of today.”
A shoot-down would echo two other instances of surface-based missiles striking civilian jets. In 2014, pro-Russian rebels in Ukraine fired on and destroyed a Malaysia Airlines plane, while in 1988 an Iranian airliner was felled by a U.S. cruiser.
In both cases the doomed craft appeared to have been mistaken for hostile warplanes.
Some airlines aren’t taking any chances. Deutsche Lufthansa AG tweeted Friday that it turned around a plane headed to Tehran.
Exclusive: Video verified by The New York Times shows a Ukrainian airliner being hit over Tehran on Wednesday https://t.co/brU9ZRmRX9 — The New York Times (@nytimes) January 9, 2020
President Donald Trump, speaking to reporters in Washington on Thursday, said he had “suspicions” about why the plane went down, without being more specific. “It was flying in a pretty rough neighborhood,” Trump said. “Somebody could have made a mistake.”
The Russian-made SA-15 missile, also known as a Gauntlet or a Tor, is suspected of being involved, according to a person familiar with the matter. They are short-range weapons designed to attack planes, helicopters and other airborne targets.
Boeing rose as much as 3.1% and was up 1.5% to $336.34 Thursday in New York following reports indicating the plane was shot down. If the plane was brought down by a missile strike, it could rule out a mechanical failure that would affect other Boeing aircraft.
The Ukrainian president’s office has said 45 Ukraine experts were working in Iran on the investigation and there are “several versions” for the cause under consideration.
Iranian President Hassan Rouhani spoke by phone with his counterpart Zelenskiy on Thursday and agreed to form a task force involving their transport officials and foreign ministries, the semi-official Fars news agency reported, citing Rouhani’s deputy head of communications. Zelenskiy will discuss the crash with U.S. Secretary of State Michael Pompeo, the Ukrainian president said on Facebook.
The U.S. intelligence assessment is consistent with what some aviation accident experts have said. The apparent rapid spread of the fire combined with the sudden halt of radio transmissions from the plane after a normal climb aren’t consistent with previous crashes, said Jeffrey Guzzetti, the former head of accident investigations at the Federal Aviation Administration.
While Iranian officials initially said they suspected a problem with one of the plane’s engines, they retracted that in a preliminary report issued Thursday. The government also took the unusual step of setting up an investigative group to examine whether “any unlawful actions” initiated the fire on the plane, the preliminary report said.
Iran notified the International Civil Aviation Organization, an arm of the United Nations, about the crash, which should trigger involvement of other nations in the investigation, including the U.S., the agency said in a press release Thursday.
Under rules known as Annex 13, the nation in which a crash occurs usually is in charge of an investigation. Other nations are permitted to take part, such as the country in which the plane was made. Since Boeing manufactured the Ukrainian jet, the U.S. National Transportation Safety Board would have a right to participate.
It remains unclear whether NTSB will send a representative to the Iran because U.S. law restricts travel to that country and the exchange of certain data. The agency said in a statement on Thursday night that it had “designated an accredited representative to the investigation of the crash.”
The U.S. Treasury has granted waivers for U.S. investigators to work in Iran in the past, but it has been a cumbersome process. Also, the NTSB has at times declined to send investigators to countries it deems unsafe.
More must-read stories from Fortune:
—Geopolitical events just don’t bounce oil prices like they used to
—As investors shrug off Iran concerns, analysts find the complacency ‘disconcerting’
—Greenpeace ranks China’s tech giants on renewable energy
—Laws meant to close down tax havens and shut loopholes could have opposite effect
—7 M&As that defined a decade of dealmaking and reshaped the economy
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-01-10--Readers Respond to Leadership Principles, Driverless Cars, and the Market in 2020

Good morning.
It’s Friday, so some feedback, of which we have lots. Corresponding with CEO Daily seems to have made some New Year’s Resolution lists. Excerpts below.
On Monday’s post offering three guiding principles for the new decade:
“Love your three guiding principles! Together, they form a framework to sharpen focus and guide the work ahead. The imperative for leaders to build a ‘reservoir of moral authority’ could not be more critical and urgent.” —DS
“Even at 0.2% of people living under $1.90/day in China—they still have ~28M people living at that level, or about 2/3 the population of Canada. At 7.7% of the world (living on that income), clearly, we still have much room to grow.” —JD
And then this, to which I can only sigh in response:
“Let me be the thousandth person to tell you…that 2020 does NOT start a new decade. That is reserved for 2021 through 2030.” —JZ
On Cliff Leaf’s post about the Waymo CEO’s comments at Fortune’s CES dinner, we received the following:
“The other side is hacking. No matter how great our protections are, someone can hack it… We have seen the damage that one crazy person can do with a gun. How much can be done with a fleet of 80,000 LB trucks.” —RB
And finally, my post on the incongruity in investors thinking the stock market will go up in 2020 while also thinking we will have a recession received this response:
“As long as a central bank can ‘artificially create trillions in liquidity’—all the old economic models are void. We’re in uncharted territory, nobody knows the end game or when, but few suspect it will be pretty.” —JL
More news below.
Alan Murray
@alansmurray
alan.murray@fortune.com
TOP NEWS
Tehran Plane Crash
After initially being attributed to a technical failure, U.S. officials said late Thursday that they had intelligence that the crash of the Boeing 737 just outside of Tehran, which killed 176 people, was actually downed by a missile fired by Iranian military forces. New York Times
'Designed By Clowns'
Boeing has released a new batch of internal messages, in which employees discussed unease with the 737 Max and problems with flight simulators used to train pilots, and made flippant statements about the level of regulatory oversight of the plane's development. One company pilot: “This airplane is designed by clowns, who in turn are supervised by monkeys.” Fortune
Political Deadlock Over Iran
Congress led by Democratic Speaker Nancy Pelosi voted on Thursday on a resolution to stymie Trump's ability to take further military action in Iran without congressional approval, a vote that Fortune's Nicole Goodkind says is "at best symbolically potent and at worst pointless." The bill lacks the support in Congress to override a presidential veto. Fortune
Prodigal Son or Unwelcome Fugitive?
The arrival of former Nissan and Renault executive Carlos Ghosn in Lebanon has been either fortuitous or ironic—depending on your perspective. On the one hand, the country doesn't have a great reputation for tackling corruption charges, or an extradition treaty with Japan. On the other hand, the Lebanese are fed up with corruption, and the country is facing a severe economic crisis. Fortune
AROUND THE WATER COOLER
Wine War
U.S. tariffs imposed on a hodge-podge of European goods, including wine, are hitting the country's industry hard, writes Fortune's Vivienne Walt. But in addition to the financial pain—one winemaker said he had not received a single U.S. order since mid-October—cultural links are also taking a hit. When it comes to the U.S. and French wine, "this is a love story that has been going on for a long, long time." Fortune
Oil Shrugs
After the killing of the Iranian Gen. Qassem Soleimani last week, oil prices rallied, hitting $70/barrel for the first time in more than three months in intraday trading. But by Wednesday, the rally was over, and the price gains were eliminated. In the age of shale, geopolitics in the Middle East don't have the same effect they used to. Fortune
Back To Basics
A cyber attack on Travelex, the world's largest retail currency dealer, has been ongoing since New Year's Eve, forcing the company to go back to basics: manual calculators, for one. A group that claimed responsibility for the attack was reportedly demanding millions to prevent them from releasing customer information after first hacking the company six months ago. FT
Play It Again
U.S. music streams on services including Spotify, Apple, and YouTube collectively rose 30% last year—topping one trillion for the first time ever. That was led by major artists like Taylor Swift, Billie Eilish, and Post Malone, and unsurprisingly, it heralded the continued slide of physical CD sales. WSJ
A note from CEO Daily: The future of Fortune is coming. This month, we will be launching (deep breath) a new site and app, a new video hub, a new magazine, plus a subscription package that offers the best of business, all in one place: strategic insights, deep-dive stories, and exclusive access to what the C-suite is thinking. We'll keep you updated on the launch, and you can also tell your friends to keep tabs on developments by leaving their email addresses here.
But that's not all! Fortune is also getting ready to launch a raft of new newsletters, two of which you can sign up for in advance. Fans of the Sino Saturday edition of CEO Daily will be excited to learn that Clay Chandler and the Hong Kong team are preparing a daily newsletter on business in China, called Eastworld. And our Rome-based ace, Bernhard Warner, will write a daily newsletter on finance news, awesomely named Bull Sheet.
This edition of CEO Daily was edited by Katherine Dunn.


fortune--2020-01-10--Tesla Has Delivered Its First China-Made Cars. Now It’s Time to Face the Competition

Readers Respond to Leadership Principles , Driverless Cars , and the Market in 2020

Tesla has had a exciting week in China, one that included CEO Elon Musk’s dancing celebration of the first deliveries of Model 3 sedans produced in the company’s new Shanghai factory, as well as the announcement of plans to design an original car in China for sale worldwide.
The excitement extended to the company’s stock as well: Before slipping Thursday, Tesla shares rose almost 20% during a “meteoric” six-session winning streak.
The question now is whether Tesla can keep the momentum going.
Tesla has a strong brand reputation in China—the world’s largest market for electric vehicles (EVs)—and slashing prices on the new Shanghai-made Model 3 is already helping to boost sales.
But the company will have to navigate China’s fast-changing electric vehicle sector. Beijing has begun to contemplate a new round of cuts to its the country’s subsidy schemes, and the market, already host to a slew of domestic EV startups, will soon see the arrival of EV offerings from high-profile foreign automakers like BMW and Mercedes.
Morningstar forecasts EVs will grow to account for 35% of all auto sales in China by 2030.
Domestic competition
Tesla will inevitably face more competition in China in the near future, though analysts expect it to come less from the plethora of domestic brands already in the market than from automakers like BMW and Mercedes, which have plans to roll out their own EVs in China.
“I think Tesla will take a big chunk of the premium demand in the near-term,” says Ivan Su, a Hong Kong-based equity analyst at Morningstar. “I don’t think the domestic brands have that much of a standing in the premium space.”
Still, Su says it’s “definitely possible” for domestic brands to start to compete with Tesla in the premium EV space, though he doesn’t see it happening soon. He points to Chinese EV maker Nio as a possible contender for the high-end slice of the market, but Nio, once dubbed China’s Tesla, has been struggling with cashflow, and Su says its recent better-than-expected sales should not be taken as a positive sign until the firm releases profit figures.
“In the traditional gasoline vehicle space we’ve had so many domestic brands that are trying to challenge premium international brands, but none of them have really done it, and I don’t see why things will be different for electric vehicles.” Su says.
Foreign brands
As domestic brands compete with each other to differentiate themselves in the growing EV market, Su says, Tesla will face tougher competition at the high end from BMW and Mercedes once they roll out their EVs in China—though that may not happen for some time.
A recent change in ownership limits has made it easier for foreign brands to enter. The Chinese government lifted restrictions on foreign ownership for auto manufacturers in 2018. Previously, foreign carmakers could only produce and sell in China through joint ventures with Chinese companies.
The Tesla Gigafactory in Shanghai opened last year as China’s first wholly foreign-owned auto production plant since the government eased regulations, and the sedans delivered this week were Tesla’s first made-in-China cars to be shipped out to customers.
On Jan. 8, Mercedes-Benz and China’s Geely announced plans to produce electric Smart cars in China, and in November, BMW Group announced plans to build a Chinese plant to produce EV models of the Mini car brand in partnership with China’s Great Wall Motor. Construction is slated to begin this year.
For now, the image of China’s EV leader is Tesla’s to lose.
“Tesla still enjoys a quite positive image in China,” says Yuwan Hu, chief operating officer at Daxue Consulting, a China market research firm. Hu credits branding, and the social status that pricey cars bestow on auto-owners for Tesla’s popularity in China.
Founder Elon Musk is, of course, also a huge draw for the brand, due to his entrepreneurial backstory and, Hu says, even his reputation as “Silicon Valley’s Iron Man,” thanks to Marvel’s popularity in China.
Freeman Shen, CEO of Chinese EV startup WM Motor, told CNBC that Tesla’s presence in China is “a good thing” for local EV brands because it will encourage potential customers to consider electric vehicles as a whole. “Some of them will buy Tesla’s cars and some will buy WM’s cars. In EV market it is impossible that the winner take all.”
Su agrees with Shen’s assessment, saying that Tesla will spur more interest in electric vehicles for personal use, rather than the sector’s current reliance on commercial uses like ride-hailing and urban taxi fleets.
Su says “a big chunk” of sales for domestic brands like BYD has been for commercial purposes, as well as for people unable to obtain license plates in big cities like Shanghai and Shenzhen (EVs receive green license plates without restrictions on when cars can be driven, which conventional vehicles are subject to).
“What [Tesla] would bring is a premium offering—an attractive, original brand—to Chinese consumers that will open up a lot more household demand and a lot more premium demand going forward.” Su says.
Tesla shares have gained 42% in the last 12 months, and 15% since the new year. Thursday’s share price dip marked Tesla’s first losses in 2020.
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fortune--2020-01-10--French Winemakers Are Angry About Trump’s Tariffs. American Importers Are Even Angrier

Why This 20-Year-Old Apprentice at Bosch Chose to Work First and Get Her Degree Later

Off the two-lane road that cuts through Burgundy’s famed vineyards, a maze of narrow tracks and hairpin bends lead up into the hills, until you reach the picture-perfect, cream-colored village of Bouzeron. Here, farmers have been tending their vines for centuries, ever since the monks in the region began fermenting grapes in the Middle Ages. More than 500 years on, this tiny idyll hardly seems like an obvious site for an international trade war.
And yet behind a set of tall gates, one of the region’s 4,000 winemakers has spent the winter grappling with an unexpected and powerful new foe: President Trump. “Your president has imposed a 25% tariff,” fumes Pierre de Benoist, 45, owner of 74 acres of prime vines called the Domaine de Villaine, when I appear on his doorstep a few days before Christmas. “What do we have to do with all this? I’m a winemaker from Burgundy,” he says. ”It is like a teacher who does not know who to punish, so he punishes the whole class.”
That punishment is just one facet of the trade wars the U.S. is waging on multiple fronts, with Trump’s America First economic policy felt from Beijing to Brussels. But the conflict is sending shock waves through Burgundy, the region just west of the Alps where Pinot Noir and Chardonnay were invented centuries ago, and which now produces some of the world’s highest-priced, most coveted wines.
Trump has been a vociferous critic of European Union subsidies that help Continental winemakers market their goods overseas. In recent months, however, disputes involving other industries have spilled over to swamp France’s wineries. In October, the World Trade Organization ruled against the EU in a case involving subsidies for France-based passenger-jet conglomerate Airbus, Boeing’s bitter rival. It also ruled that the U.S. could legally impose $7.5 billion in tariffs on European goods, as compensation. The White House wasted no time: On October 18, Trump announced 25% import duties on a hodge-podge of products, including French wines—effective immediately.
Far steeper oeno-tariffs could follow. In June, French President Emmanuel Macron signed into law a 3% “digital services” tax on revenues generated in France by tech companies making more than 750 million euros (about $833 million) a year. That levy, collected at the end of December, falls heavily on American giants Google, Apple, Facebook and Amazon, which have frequently been criticized for sidestepping local taxes by domiciling core operations in lower-tax nations. In December, Trump warned that he would retaliate with 100% tariffs on goods including French wine; those higher levies could soon become reality if a truce isn’t reached.
Aerial view of Burgundy’s Chateau de la Tour. Courtesy of Chateau de la Tour
French Economy Minister Bruno Le Maire pleaded this Monday for U.S. officials to “return to their senses.” And next week EU trade commissioner Phil Hogan will make his first trip to Washington, D.C. in his new job, to press his case with U.S. Treasury Secretary Steven Mnuchin. But at least for now, the punitive tariffs loom menacingly over the wine industry—in France and the U.S. alike.
A scramble in Burgundy
In Burgundy, there is already a sense of impending doom. Winemakers have been scrambling to cope with penalties that kicked in without any negotiation. The October tariffs were effective immediately, trapping even exports that were already steaming across the Atlantic Ocean.
“I had one order on the water that day, going to a new client in Oregon,” says Megan McClune, general manager of the Domaine Jessiaume winery, sitting in her headquarters in an old mansion in the village of Santenay, a short drive from Bouzeron. “They bought at one price, and by the time it landed it cost 25% more,” she says. (McClune says she gave the client a discount to compensate.)
McClune, who is from Boston, moved to Burgundy in 2004 to work in the wine industry, and she now ships about 12,000 bottles a year to the U.S. The States are Domaine Jessiaume’s biggest export destination, as they are for virtually every winery in Burgundy. The U.S. imports about $1.1 billion worth of French wine each year, accounting for 20% of France’s wine exports. In Burgundy, that share is about 30%.
Grape sorting at the Domaine Jessiaume winery. Courtesy of Domaine Jessiaume Winery
The tensions over French wine had been simmering through much of last year. Trump—a teetotaler—has taken regular swipes at France’s wine industry, which is worth 13 billion euros (about $14.3 billion) a year, and is the country’s third largest export in value, after airplanes and luxury fashion. Trump has also tweeted his preference for American wines; “I just like the way they look, okay?” he told reporters last July.
That month, the wine squabble threatened to explode into a full-blown trade war, when French President Emmanuel Macron signed the tech tax into law. “If you do it, I’m going to tax your wine,” Trump warned Macron. At the time, France’s agriculture minister called Trump’s idea “completely moronic.”
But if France’s digital tax remains in place—as it looks likely to do—the already hefty 25% tariff could soon seem like small change to Burgundy winemakers like Benoist and McClure. The 100% tariffs that Trump has put on the table would also apply to sparkling wines like Champagne, which are exempt from the current 25% duties. Amid Burgundy’s neat vineyards and ancient villages, even as winemakers wonder whether the U.S. President will dare to carry out his threat, they have already begun eyeing new customers and markets.
Historic ties
Until one visits Burgundy, it is hard to grasp fully the deep ties the winegrowers here feel with the U.S. Unlike the sprawling wine estates in Bordeaux—France’s other famous wine region—many of these vineyards are tiny family-owned operations, handed down through generations over the centuries.
In interviews, several winemakers recalled how they had built close friendships in the U.S. over the years, sent their children to study winemaking in California, and welcomed American winegrowers to Burgundy. Some recounted how Thomas Jefferson stocked his cellar in Monticello with Burgundy wines, after visiting the very same wineries in 1787. “This is a love story that has been going on for a long, long time,” says Louis-Fabrice Latour, 55, the seventh-generation head of his company Louis Latour Wines, which was formed more than 200 years ago.
Today the company is Burgundy’s biggest producer of the top-ranked grand cru. “We started shipping wine to America just after the Civil War,” he says. These days, Latour’s exports to the U.S. are about two million bottles a year, and he operates a U.S. subsidiary in San Francisco. And yet he says the ties to the U.S. could easily shatter, if tariffs remain in place. “There are many growers who don’t want to ship to America anymore, saying their distributors do not want to pay the taxes,” he says. “Some just give up. They can live without the U.S.”
That would be a drastic change for Burgundy, and for French wine. Indeed, the dip in trade with the U.S. is already starkly evident. “Usually by this time I have all my January orders in,” says Thibault Huber, head of Domaine Huber-Verdereau in the village of Mersault. “I have had not a single U.S. order since October 18.”
American tariff, American pain
U.S. importers, meanwhile, fear they won’t be able to keep customers supplied with Burgundy wines. And that highlights an irony of the tariff threats: Those importers, many of whom deal exclusively in French or European wines, may suffer worse pain than the winemakers themselves if tariffs escalate.
Under ordinary circumstances, American wine merchants and distributors compete to buy the best Burgundy wines, which are produced in limited quantities. Winemakers in Burgundy talk of “allocations” of wines, in which they reserve shipments for favored U.S. clients long before they have bottled the wine. Ordinarily, U.S. wine importers travel to Burgundy in January to sample the year’s vintage and lock in orders.
But other countries could potentially begin to outbid the U.S., especially on Burgundy’s highest-priced wines, which sell for $2,000 a bottle in U.S. restaurants. “A lot of importers in Russia and China ask me if they can buy my wine, but I have nothing to sell,” Huber says. “But if my U.S. business stops I can quite easily sell elsewhere. The bottles will not stay in my cellars for long.”
For now, the 25% tariff is deeply painful, but not necessarily a mortal threat to the trade. Trump’s threatened 100% tariff, on the other hand, would be a seismic jolt. “It will pretty much mean the destruction of the modern wine industry as we know it,” says Steve Melchisky, president and owner of USA Wine West LLC, from his base in Portland, Maine.
Americans, who consume by far the world’s most wine, produce only about two-thirds of their own; much of the rest comes from Europe. But Melchisky foresees a steep drop in consumption if taxes soar under Trump’s plan. “Who would buy a $15 Bordeaux that suddenly costs $35?” he says. Nobody.”
The same day I arrived in Burgundy in mid-December, U.S. importers began a frenzied lobbying effort, bombarding U.S. Trade Representative Robert Lighthizer with thousands of letters in which they explained that Americans would likely lose out big if Trump carried out his threat to impose 100% tariffs. The tariff would “effectively shut down the access Americans have to European wine,” wrote Kermit Lynch Wine Merchants of Berkeley, Calif., to Lighthizer; the company has imported French and Italian wines for 47 years. “The network and ecosystem that manages and sells these wines would be gravely threatened.”
Kermit Lynch president Dixon Brooke tells me he believes Burgundy winegrowers are already rethinking their dependence on the U.S.—even if Trump drops his plan to impose 100% tariffs. “Allocations could well be sold elsewhere, and may not come back to the U.S.,” he says.
Vineyards at Chateau de la Tour. Courtesy of Chateau de la Tour
Over lunch one day, François Labet, owner of Burgundy’s Chateau de la Tour and head of the Burgundy Wine Board, says he believes winemakers will ship their bottles elsewhere if U.S. tariffs continue to climb higher.
Even those in Burgundy, he says, face huge challenges, including diminishing yields from erratic weather and climate change; Spring frosts have killed crops several times in recent year. “Everyone forgets we are farmers, fruit producers,” he says.
So what if Trump imposes 100% tariffs? Labet laughs. “We will go to Lourdes and pray to the Virgin Mary to ask Trump to be more reasonable,” he says, referring to France’s pilgrimage site for Catholics. Across the ocean, U.S. importers are praying even harder.
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fortune--2020-01-10--‘Designed by Clowns…Supervised by Monkeys:’ Internal Boeing Messages Slam 737 Max

Boeing Co. released a new batch of internal messages in which company employees discussed deep unease with the 737 Max and problems in flight simulators used to train pilots on the new jetliner, while also trying to avert greater regulator scrutiny of the plane.
“This airplane is designed by clowns, who in turn are supervised by monkeys,” said one company pilot in messages to a colleague in 2016, which Boeing disclosed publicly late Thursday. The company had already provided the documents to lawmakers and the U.S. Federal Aviation Administration, who are investigating the 737 Max and the process that cleared it to fly.
The communications threaten to upend Boeing’s efforts to rebuild public trust in the 737 Max, which has been grounded since March after two deadly crashes. That will add to the hurdles for David Calhoun, a longtime board member who will take over on Jan. 13 as chief executive officer from Dennis Muilenburg, who was ousted last month.
“These newly-released emails are incredibly damning,” said U.S. Representative Peter DeFazio, an Oregon Democrat who chairs a committee that is investigating Boeing and the Max.
“They paint a deeply disturbing picture of the lengths Boeing was apparently willing to go to in order to evade scrutiny from regulators, flight crews, and the flying public, even as its own employees were sounding alarms internally,” DeFazio said in a statement.
Boeing, which provided the documents under pressure from U.S. lawmakers, apologized and said it was committed to “full transparency” with the FAA.
“We regret the content of these communications, and apologize to the FAA, Congress, our airline customers, and to the flying public for them,” the Chicago-based company said in a statement. “We have made significant changes as a company to enhance our safety processes, organizations, and culture.”
In a statement, the FAA said it has reviewed the Boeing messages and found that “nothing in the submission pointed to any safety risks that were not already identified as part of the ongoing review of proposed modifications to the aircraft.”
Simulator reversal
The internal documents — consisting of more than 100 pages of messages, emails and memos — were released days after Boeing said reversed its earlier opposition to requiring Max pilots to undergo simulator training before the grounded plane resumes commercial flight.
Some of the most notable messages:
“I just jedi mind tricked this fools. I should be given $1,000 every time I take one of these calls. I save this company a sick amount of $$$$.” “Would you put your family on a MAX simulator trained aircraft? I wouldn’t.” “I’ll be shocked if the FAA passes this turd.” “This is a joke. This airplane is ridiculous.” “Best part is we are re-starting this whole thing with the 777X with the same supplier and have signed up to an even more aggressive schedule!” “Jesus, it’s doomed.”
One of the company’s big selling points with customers had been that pilots certified for an earlier generation of 737 jets only needed a short computer course to brush up their skills for the Max. Those assurances helped make the Max Boeing’s best-selling jetliner.
The messages shared by the company at times reveal the pressure on employees — and customers — to avoid the additional training. They also highlighted the technical glitches that bedeviled Max simulators after the jet began flying commercially in mid-2017. Boeing said that “any potential safety deficiencies identified in the documents have been addressed.”
In one exchange about the Max flight simulators, an employee said, “honesty is the only way in this job — integrity when lives are on the line on the aircraft and training programs shouldn’t be taken with a pinch of salt. Would you put your family on a MAX simulator trained aircraft? I wouldn’t.”
The missives were drafted by a small number of employees, primarily technical pilots and personnel working to develop and qualify the Max simulators, a Boeing official said by email. While all names were redacted, the company confirmed that some involved are the “same individuals” behind incendiary emails revealed last year.
Edward Pierson, a former manager on the Boeing 737 Max production line, listens during a House Transportation and Infrastructure Committee hearing Washington, D.C., on Dec. 11, 2019. Pierson warned senior Boeing colleagues in 2018 about what he said were overworked employees and repeated quality issues in building the 737 Max. Andrew Harrer—Bloomberg via Getty Images
‘Jedi mind tricks’
In messages disclosed in October, Mark Forkner, the former 737 Max Chief Technical Pilot, bragged of employing “Jedi mind tricks” on regulators and described problems in a 737 Max simulator. In instant messages, Forkner told a colleague that MCAS was “running rampant in the sim on me,” referring to simulator tests of the aircraft. “Granted, I suck at flying, but even this was egregious.”
Those messages, shared early in the year with federal investigators — but not the FAA — sparked fury among lawmakers who later unloaded on Muilenburg during congressional hearings that followed their release.
The latest batch of communications includes a 2017 email in which the chief technical pilot on the 737 crowed to Boeing colleagues, “Looks like my jedi mind trick worked again!” Attached was a forwarded email exchange in which the pilot warned an unnamed recipient against offering simulator training for 737 Max pilots, pushing instead for the computer-based course that regulators had already approved for pilots transitioning to Max from earlier 737 models.
“I am concerned that if [redacted] chooses to require a Max simulator for its pilots beyond what all other regulators are requiring that it will be creating a difficult and unnecessary training burden for your airline, as well as potentially establish a precedent in your region for other Max customers,” the Boeing pilot wrote in the forwarded message.
An unidentified Boeing employee in a different text message exchange brags about swaying India’s regulator “to make them feel stupid about trying to require any additional training requirements.”
Added the sender: “I just Jedi mind tricked this [sic] fools. I should be given $1000 every time I take one of these calls. I save this company a sick amount of $$$$.”
In another 2017 email, the 737 chief technical pilot again expressed resistance to simulator training for pilots transitioning from the older 737 NG family to the Max. “Boeing will not allow that to happen. We’ll go face to face with any regulator who tries to make that a requirement,” the pilot wrote.
MCAS memo
In a 2013 memo, an employee discussed new software on the Max that would later be implicated in both crashes. The Maneuvering Characteristics Augmentation System — which wasn’t disclosed to pilots — activated accidentally and overwhelmed a Lion Air flight crew in 2018 and Ethiopian Airlines pilots last year.
The employee recommended describing MCAS as an addition to an existing speed trim system, instead of as a new feature.“If we emphasize MCAS is a new function there may be greater certification and training impact”
In a memo on June 1, 2018, an employee vented about a culture where managers only give lip-service to quality. The sender was warning that Boeing might not be granted an extension to fix the Max simulator at London’s Gatwick airport, which would put the device at risk of losing its qualification.
“We put ourselves in this position by picking the lowest cost supplier and signing up to impossible schedules. Why did the lowest ranking and most unproven supplier receive the contract? Solely based on bottom dollar. Not just MAX but also the 777X!”
Added the employee: “I don’t know how to fix these things… it’s systematic. It’s culture. It’s the fact that we have a senior leadership team that understand very little about the business and yet are driving us to certain objectives. Its lots of individual groups that aren’t working closely and being accountable. It exemplifies the ‘lazy B’” — the nickname the person used for Boeing.
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fortune--2020-01-10--Insight Into a Mystery Illness

Insight Into a Mystery Illness

This is the web version of Brainstorm Health Daily, Fortune’s daily newsletter on the top health care news. To get it delivered daily to your in-box, sign up here.
Good afternoon, readers.
There’s been a curious (and concerning) pneumonia-like outbreak in China—and we may finally have some clues as to what’s causing it.
China’s Xinhua news agency reports that the lung illness, which has affected about 60 people so far, may be linked to a new form of coronavirus (a biological suspect that was already under investigation by the World Health Organization, as the BBC notes). The coronavirus is one that can cause a broad range of respiratory and sinus conditions—but the gravity of the situation can fluctuate significantly depending on the precise strain.
This process needs to play itself out given the nature of viruses and their various mutations, which can affect everything from emergency response to a basic understanding of how a specific pathogen spreads. In the meantime, according to the BBC, certain travelers and passengers in China will go through health screenings.
Read on for the day’s news.
Sy Mukherjee
sayak.mukherjee@fortune.com
@the_sy_guy
DIGITAL HEALTH
NuvoAir gets FDA clearance for its lung disease connected device. MobiHealthNews reports that NuvoAir has cleared its digitally connected device for lung disease patients—AirNext, a "spirometer" that could be used by used by patients with relatively common conditions like asthma and chronic lung disease, as well as rare disease patients who suffer from cystic fibrosis. (MobiHealthNews)
INDICATIONS
FDA approves another rare cancer drug. The FDA appears to continue its drug approval binge in this new year, clearing Blueprint Medicine's stomach cancer treatment (for a rare form of the disease). More on this later. (Reuters)
A clarification about the lung cancer death rate study. I wanted to issue a clarification about something: The cancer death study which we blurbed last night is a bit nuanced. The study only refers to death rates—not actual deaths. Those are two very different things. And the death rate analysis is an age-adjusted one, which opens up a whole new can of worms. The main takeaway, though, is that a reduction of death rates is not the same thing as a reduction in deaths.
REQUIRED READING
Fortune Poll: Investors See a 2020 Recession Coming—But Think They'll Make Money, by Lance Lambert
Sex Tech Steals the Spotlight at CES, by Chris Morris
How Elon Musk Built a Tesla Factory in China in Less Than a Year, by Bloomberg
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fortune--2020-01-10--Mark Zuckerberg Ends His Annual Challenge Tradition in Favor of a ‘Longer-Term Focus’

Mark Zuckerberg’s New Year’s resolution: No more public New Year’s resolutions.
The Facebook chief executive officer, who in January usually shares a “personal challenge” for the coming year, said Thursday he’s forgoing that tradition in 2020. Instead, Zuckerberg said he will “take a longer term focus” this decade to prioritize projects that will take much longer to come together.
“Rather than having year-to-year challenges, I’ve tried to think about what I hope the world and my life will look in 2030 so I can make sure I’m focusing on those things,” he wrote on his Facebook page. Among the big ideas he listed: funding millennial “entrepreneurs, scientists and leaders;“ building a privacy-focused social platform; developing virtual and augmented reality products; and “establishing new ways for communities to govern themselves,” such as his company’s new content oversight board.
Facebook is already working on most of the long-term ideas Zuckerberg laid out in his post, making them arguably less personal than past challenges. Some of the CEO’s pledges have also opened him up to criticism. Last year, Zuckerberg resolved to “host a series of public discussions about the future of technology in society—the opportunities, the challenges, the hopes, and the anxieties.” In his talks related to the pledge, he spoke almost exclusively to white men.
In 2017, Zuckerberg resolved to visit all 50 states, a countrywide tour that spawned rumors that he wanted to run for president. Prior challenges included learning Mandarin and a promise to only eat meat that he killed himself.
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