Uber, Lyft Ponder “Plan B” Should They Lose This Week’s California Court Showdown
Uber, Lyft Ponder "Plan B" Should They Lose This Week’s California Court Showdown
The battle for the future of ride-sharing businesses in the US will hinge this week on a critical decision from a California Judge regarding whether Uber and Lyft will be forced to comply with a restrictive new law in the state of California called AB5, a bill that is disrupting the livelihoods of some of America's most vulnerable workers in the middle of a once-in-a-century pandemic.
AB 5, better known as California's anti-freelancer law, as it's written to establish numerous requirements that restrict companies' ability to hire and compensate independent contractors. Uber and Lyft's entire business model is built on the principle that its drivers are merely "freelancers", who have no accountability to the company (other than complying with the ToS), and vice-versa: They can choose to work whenever they want.
However, critics on the left led by AOC and her fellow "Squad"-mates have singled out Uber and Lyft for depriving their workers of adequate and livable wages, and for demolishing industries like NYC's yellow cabs, driving many drivers to suicide as the value of NYC's taxi cab medallions plummeted.
With Uber & Lyft having appealed a California judge's ruling that the two companies must comply with the new law, which would mean switching all of their drivers in California into full-time employees, a difficult process in the best of times, but an improbable ask during the middle of a recession. The economics, Lyft & Uber have argued, just wouldn't make sense, and Uber CEO Dara Khosrowshahi has told the press that should the appeal be denied, Uber will likely need to shut down its service in the state, at least for a short time.
As the countdown to the decision continues, reporters and analysts are trying to game out what Uber and Lyft might do if the decision goes against them, as well as how the two companies might react other scenarios, since AB 5 likely isn't going away any time soon.
The NYT reported Tuesday morning that one plan under discussion at Uber and Lyft would be to shift their operations to a franchise model, where they provide the software, and independent entrepreneurs provide the cars and the dispatch. It would effectively mark a return to black-cab fleets of old, as the NYT pointed out.
We could call it 'the McRideshare'.
One option that both companies are seriously discussing is licensing their brands to operators of vehicle fleets in California, according to three people with knowledge of the plans. The change would resemble an independently operated franchise, allowing Uber and Lyft to keep an arms-length association with drivers so that the companies would not need to employ them and pay their benefits.
The idea would effectively be a return to the days of how groups of black cars were run. Lyft has presented the plan to its board of directors, one person said. Uber, which already works with fleet operators in Germany and Spain, is also familiar with the business model.
The paper added that some of the scenarios planned out during Uber's corporate strategy sessions were given code-names from the "Super Mario Bros" video game franchise.
At Uber, many of the proposed ideas were code-named with the names of characters from the Mario Bros. video game, like Luigi, the people said. The Washington Post reported earlier on Project Luigi, which included the changes to Uber’s app that give drivers more control over fares.
Another option that policy teams at both of the companies floated was the franchise-like model, the people with knowledge of the plans said.
Under the proposal, Uber and Lyft would invite other businesses to establish ride-hailing fleets using their platforms. That could bolster the companies’ claims that they were simply tech companies that built sophisticated dispatch services and that providing transportation was outside their core business, protecting them from A.B. 5’s requirements.
At Uber, the effort drew inspiration from the company’s operations in Germany and Spain, where transportation rules have already forced it to work with fleets, Mr. Kallman said.
Lyft reportedly hashed out a different franchising plan that was based on the "FedEx" model.
Lyft based its plan on FedEx, which franchises some of its delivery routes to local operators, current and former employees said.
Uber and Lyft employees said the companies did not collaborate or share information about their plans with each other.
A franchise-like business can be challenging. Working with a fleet operator could increase costs because it introduces a third party who needs to be paid, potentially forcing Uber and Lyft to raise fares or reduce their service fees, current and former employees said. The companies would also likely have to surrender some control over driver behavior, leaving them more vulnerable to reputational damage if a driver harassed a passenger or a car was dirty.
But whatever model they choose, there will be obstacles. For instance, since Uber and Lyft have already decimated the black car industry, there aren't really any dispatchers left to absorb all this new business.
Another hurdle is that few fleet operators in California are large enough to absorb Uber’s and Lyft’s business, partly because Uber and Lyft previously disrupted taxis, black cars and similar operations.
If it goes through, we might see another California gold rush - except for taxi cab drivers and dispatchers (because somebody needs to sit in the office and drink coffee all day).
Of course, even if Uber and Lyft do lose on Friday, they will get another shot in November when California voters will be asked to classify ride-share drivers as independent contractors permanently. The measure, called Prop 22, was also helped by DoorDash and is of major consequence to the growing "sharing economy".
“We Are Headed For Another Train Wreck”: Bill Ackman Blames Janet Yellen For Restarting The Bank Run
"We Are Headed For Another Train Wreck": Bill Ackman Blames Janet Yellen For Restarting The Bank Run
Yesterday morning we joked that every…
Yesterday morning we joked that every time Janet Yellen opens her mouth, stocks dump.
Yellen opens mouth and stocks dump— zerohedge (@zerohedge) March 21, 2023
Well, it wasn't a joke, and as we repeatedly noted today, while Jerome Powell was busting his ass to prevent a violent market reaction - in either direction - to his "most important Fed decision and presser of 2023", the Treasury Secretary, with all the grace of a senile 76-year-old elephant in a China market, uttered the phrase...
- YELLEN: NOT CONSIDERING BROAD INCREASE IN DEPOSIT INSURANCE
... and the rest was silence... or rather selling.
Commenting on our chart, Bloomberg's Mark Cudmore noted it was Yellen who was "to blame for the stock slump", pointing out that "the pessimistic turn in US stocks began within a minute of Janet Yellen starting to speak."
The S&P 500 rose almost 1% in the first 47 minutes after the Fed decision. Powell wasn’t the problem either: the index was 0.6% higher in the first 17 minutes after his press conference started.
Why am I picking that exact timing of 2:47pm NY time? Because that is the minute Yellen started speaking at the Senate panel hearing. The high for the S&P 500 was 2:48pm NY time and it fell more than 2.5% over the subsequent 72 minutes. Good effort.
Picking up on this, Bloomberg's Mark Cranfield writes that banking stocks globally are set to underperform for longer after Janet Yellen pushed back against giving deposit insurance without working with lawmakers. He adds that "to an aggressive trader this sounds like an invitation to keep shorting bank stocks -- at least until the tone changes into broader support and is less focused on specific bank situations." Earlier, we addressed that too:
*YELLEN: NOT CONSIDERING BROAD INCREASE IN DEPOSIT INSURANCE— zerohedge (@zerohedge) March 22, 2023
At least until spoos drop below 4K again
Looking ahead, Cranfield warns that US financials are likely to be the most vulnerable as they are the epicenter of the debate. Although European or Asian banking names may outperform US peers, that won’t be much consolation for investors as most financial sector indexes may be on a downward path.
The KBW bank index has tumbled from its highs seen in early February, but still has a way to go before it reaches the pandemic-nadir in 2020. Traders smell an opening for a big trade and that will fuel more downside. Probably until Yellen blinks.
And if Bill Ackman is right, she will be doing a whole lot of blinking in days if not hours.
While we generally make fun of Ackman's self-serving hot takes on twitter, today he was right when he accused Yellen of effectively restarting the small bank depositor run which according to JPMorgan has already seen $1.1 trillion in assets withdrawn from "vulnerable" banks. This is what Ackman tweeted:
Yesterday, @SecYellen made reassuring comments that led the market and depositors to believe that all deposits were now implicitly guaranteed. That coupled with a leak suggesting that @USTreasury, @FDICgov and @SecYellen were looking for a way to guarantee all deposits reassured the banking sector and depositors.
This afternoon, @SecYellen walked back yesterday’s implicit support for small banks and depositors, while making it explicit that systemwide deposit guarantees were not being considered.
We have gone from implicit support for depositors to @SecYellen explicit statement today that no guarantee is being considered with rates now being raised to 5%. 5% is a threshold that makes bank deposits that much less attractive. I would be surprised if deposit outflows don’t accelerate effective immediately.
Ackman concluded by repeating his ask: a comprehensive deposit guarantee on America's $18 trillion in assets...
A temporary systemwide deposit guarantee is needed to stop the bleeding. The longer the uncertainty continues, the more permanent the damage is to the smaller banks, and the more difficult it will be to bring their customers back.
... but as we noted previously pointing out, you know, the math...
Math: $18 trillion in deposits, $125 billion in the deposit insurance fund. https://t.co/Zsu2RsJk41 pic.twitter.com/nb3Ypnt1gd— zerohedge (@zerohedge) March 21, 2023
... absent bipartisan Congressional intervention - which is very much unlikely until the bank crisis gets much, much worse - this won't happen and instead the Fed will continue putting out bank fire after bank fire - even as it keeps hiking to overcompensate for its "transitory inflation" idiocy from 2021, until the entire system burns down, something which Ackman's follow-up tweet was also right about:
Consider recent events impact on the long-term cost of equity capital for non-systemically important banks where you can wake up one day as a shareholder or bondholder and your investment instantly goes to zero. When combined with the higher cost of debt and deposits due to rising rates, consider what the impact will be on lending rates and our economy.
The longer this banking crisis is allowed to continue, the greater the damage to smaller banks and their ability to access low-cost capital.
Trust and confidence are earned over many years, but can be wiped out in a few days. I fear we are heading for another a train wreck. Hopefully, our regulators will get this right.
Narrator: no, they won't.
China’s Auto Industry Association Urges “Cooling” Of Price War, As Major Manufacturers Slash Prices
China’s Auto Industry Association Urges "Cooling" Of Price War, As Major Manufacturers Slash Prices
Just hours after we wrote about maniacal…
Just hours after we wrote about maniacal price cutting in the automotive industry in China, China's auto industry association is urging automakers to "cool" the hype behind price cuts.
The statement was made in order to "ensure the stable development of the industry", Automotive News Europe reported on Tuesday.
The China Association of Automobile Manufacturers even went so far as to put out a message on its official WeChat account, stating that "A price war is not a long-term solution". Instead "automakers should work harder on technology and branding," it said.
The consumer disagrees...
Recall we wrote earlier this week that most major automakers were slashing prices in China. The move is coming after lifting pandemic controls failed to spur significant demand in China, the Wall Street Journal reported this week. Ford and GM will be joined by BMW and Volkswagen in offering the discounts and promotions on EVs, the report says.
Retail auto sales plunged the first two months of the year and automakers are facing additional challenges in trying to transition their business models to prioritize EVs over conventional internal combustion engine vehicles.
Ford is offering $6,000 off its Mustang Mach-E, putting the standard version of its EV at just $31,000. Last month, only 84 of the vehicles were sold, compared to 1,500 sales in December. There was some pulling forward of demand due to the phasing out of subsidies heading into the new year, and Ford had also cut prices by about 9% in December.
A spokesperson for Ford called it a "stock clearance".
Discounts at Volkswagen are ranging from around $2,200 to $7,300 a car. The cuts will affect 20 gas powered and electric models. Its electric ID series is seeing price cuts of almost $6,000. The company called the cuts "temporary promotions due to general reluctance among car buyers, the new emissions rule and discounts offered by competitors."
Even more shocking is Citroën-maker Dongfeng Motor Group, who is offering a 40% discount on its C6 gas-powered sedan, now priced at $18,000.
Kelvin Lau, an analyst at Daiwa Capital Markets, told the Journal that automakers are also trying to get rid of 500,000 vehicles collectively stored in their inventory, most of which are older vehicles that won't meet new emissions standards.
David Zhang, a Shanghai-based independent automobile analyst, added: “Some car makers have been seeing very few sales. At this rate, the manufacturers’ production and dealership networks will collapse.”
COVID origins debate: what to make of new findings linking the virus to raccoon dogs
New reports suggest the pandemic’s origins may be linked to raccoon dogs sold at Wuhan’s Huanan Wholesale Seafood Market. A virologist explains.
The origin of SARS-CoV-2, the virus that causes COVID, has long been a topic of heated debate. While many believe SARS-CoV-2 spread to humans from an animal at Wuhan’s Huanan Wholesale Seafood Market, others have argued the virus was accidentally leaked from a lab at the Wuhan Institute of Virology.
Over the past week there has been intense activity surrounding the emergence of new data relevant to this question. In particular, reports emerged that the pandemic’s origins may be linked to raccoon dogs which were being sold illegally at the market.
The excitement stemmed from a re-analysis of raw data generated as part of official investigations into the role of the Huanan Wholesale Seafood Market in the outbreak.
The team of international scientists working on this re-analysis (from North America, Europe and Australia) alerted the World Health Organization and discussed the topic in an article published in The Atlantic. And the scientists themselves have now released a report on the issue, providing greater detail.
So what can we make of their findings? Will this development shift the course of the ongoing debate? Let’s take a look.
The Huanan market
In January 2020, writing about the emergence of what we now call SARS-CoV-2, I stated the importance of understanding how this pandemic began. It remains important to determine the virus’s origins because this knowledge may help us stop the next pandemic occurring.
Even very early in 2020, it was clear that the central Chinese city of Wuhan (a major metropolis and travel hub) was the epicentre of the outbreak. Within Wuhan, the Huanan seafood market stood out as it was associated with many – but not all – of the earliest cases. Indeed, the market was closed on January 1 2020, animals were culled, and the site was disinfected.
Suspicions arose given the role that animal trade and markets had played in the emergence of the closely related SARS-CoV-1 virus (which caused SARS, a widespread outbreak of viral respiratory disease) nearly two decades earlier. Evidence emerged that the Huanan seafood market also sold live mammals, including a fox-like mammal known as a raccoon dog, that we now know are susceptible to SARS-CoV-2.
Later epidemiological and genetic analyses further focused in on the market, and even specific stalls within it, as being the origin of the pandemic.
Read more: The original Sars virus disappeared – here's why coronavirus won’t do the same
The new data
As part of the official investigations into the market, swabs were collected from various parts of the market in the two months after it shut down at the start of 2020. The scientists who undertook this research, from the Chinese Center for Disease Control and Prevention, posted their analysis as a pre-print (a study yet to be peer-reviewed) in February 2022.
In this, the team concluded that the market likely played a significant role in SARS-CoV-2’s early spread, but that they couldn’t detect the virus in samples taken directly from animals. They reported that all the virus evidence found was associated with humans, and it was therefore likely the virus had been brought into the market by humans, not animals, and so perhaps the pandemic began elsewhere.
However, prior to any official peer-reviewed publication, the raw data from this work was released on an open scientific database called Gisaid. And the group of scientists who re-analysed this data did actually find an association between SARS-CoV-2 and animals, in particular raccoon dogs in the market.
They found DNA from animals mixed in with SARS-CoV-2 in a number of samples from the market. Some positive samples contained no human DNA and mostly raccoon dog DNA. This mix of virus and animal material is consistent with an infected animal – not a human – shedding virus, which is what you might expect if SARS-CoV-2 originated from animals brought into the market. Unfortunately, samples from a living raccoon dog were either not taken or not reported, and the official investigation makes no mention of raccoon dogs.
Where to from here?
While this latest data is one additional piece of the puzzle that supports an origin of the pandemic linked to Wuhan’s animal trade, it is unlikely to provide irrefutable evidence. It’s important to note it’s also a pre-print.
Ideally, we would like animal samples from early December 2019, and to compare animal virus genomes with human ones. It will also be crucial to follow events backwards through the animal trade and farming systems to work out where the animals got the virus from in the first instance.
Further, we must bear in mind that the virus could have easily been given to a raccoon dog by an infected human, or that the association between raccoon dog DNA and SARS-CoV-2 may be coincidental.
Read more: We want to know where COVID came from. But it’s too soon to expect miracles
However, evidence is accumulating that official investigations have left a gap in their research – particularly around the role that animals like raccoon dogs and the wildlife trade played in the origins of the pandemic.
While it may be unlikely that we will ever get concrete evidence as to how SARS-CoV-2 entered the human population, we can still think pragmatically and seek to alter behaviour and practices to reduce the chance of a new pandemic. One immediate target would be food systems (encompassing farm to fork), and how to make farming and the wildlife trade safer for all, potentially by enhancing virus surveillance in animals.
Connor Bamford receives funding from Wellcome Trust, UKRI, SFI and BMA Foundation.disease control center for disease control pandemic coronavirus genetic dna spread wuhan europe world health organization
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