automobiles

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Was Chrysler’s Vehicle Hacking Risk an SEC Disclosure Reportable Event?

[photo: K2D2vaca via Flickr]

[photo: K2D2vaca via Flickr]

Remember the data breach at JPMorgan Chase, exposing 76 million accounts to “hack-mapping“? Last October, JPMorgan Chase publicly disclosed the intrusion and exposure to investors in an 8-K filing with the Securities and Exchange Commission. The statement complied with the SEC’s CF Disclosure Guidance: Topic No. 2 – Cybersecurity.

Other companies whose customers’ data have been exposed also disclosed breaches in 8-Ks, including Target, TJX Companies, Heartland Payment, EMC and Google. (Firms NASDAQ, Citigroup and Amazon have not.)

Disclosure of known cybersecurity threats or attacks with potential material risks allows investors to make informed decisions. Stock share pricing will fluctuate and reflect the true market value once risk has been factored by investors — and not remain artificially high.

Fiat Chrysler America (FCA; NYSE:FCAU) has known for nearly a year about the risk that Chrysler vehicles could be hacked remotely, according to Fortune magazine Thursday.

Yet to date no filing with the SEC has been made, disclosing this specific cyber risk to investors, customers, and the public.

The SEC’s Disclosure Guidance, though, is just that — guidance. There aren’t any firm rules yet in place, and the guidance itself was published in October 2011. A lot has happened and changed about technology and cybersecurity risks since then; the guidance has not reflected the increasing threats and attacks to business’ data.

Nor does the SEC’s guidance distinguish between cybersecurity threats to service products (like banking services), versus hardlines or manufactured goods (like automobiles which offer software as an additional, non-essential feature). The software industry’s chronic security patching confuses any distinction; should software companies likewise include all security patches in their SEC filings, or continue as they have without doing so? It’s easy to see how revelations about Adobe Flash after Hacking Team was hacked have materially hurt Adobe and all companies relying on Flash — yet Adobe hasn’t released a statement at its website. (Only a statement addressing the 2013 threat to customer accounts is posted.)

Are financial services firms any more obligated than software firms? Are automobile companies, which claim ownership of on-board software, any more obligated than software companies? Continue reading

Why Apple Should Pay Particular Attention to Wired’s New Car Hacking Story

This morning, Wired reports that the hackers who two years ago hacked an Escape and a Prius via physical access have hacked a Jeep Cherokee via remote (mobile phone) access. They accessed the vehicle’s Electronic Control Unit and from that were able to get to ECUs controlling the transmission and brakes, as well as a number of less critical items. The hackers are releasing a report [correction: this is Markey’s report], page 86 of which explains why cars have gotten so much more vulnerable (generally, a combination of being accessible via external communication networks, having more internal networks, and having far more ECUs that might have a vulnerability). It includes a list of the most and least hackable cars among the 14 they reviewed.

Screen Shot 2015-07-21 at 8.37.22 AM

Today Ed Markey and Richard Blumenthal are releasing a bill meant to address some of these security vulnerabilities in cars.

Meanwhile — in a remarkably poorly timed announcement — Apple announced yesterday that it had hired Fiat Chrysler’s former quality guy, the guy who would have overseen development of both the hackable Jeep Cherokee and the safer Dodge Viper.

Doug Betts, who led global quality at Fiat Chrysler Automobiles NV until last year, is now working for the Cupertino, Calif.-based electronics giant but declined to comment on the position when reached Monday. Mr. Betts’ LinkedIn profile says he joined Apple in July and describes his title as “Operations-Apple Inc.” with a location in the San Francisco Bay Area but no further specifics.

[snip]

Along with Mr. Betts, whose expertise points to a desire to know how to build a car, Apple recently recruited one of the leading autonomous-vehicle researchers in Europe and is building a team to work on those systems.

[snip]

In 2009, when Fiat SpA took over Chrysler, CEO Sergio Marchionne tapped Mr. Betts to lead the company’s quality turnaround, giving him far-reaching authority over the company’s brands and even the final say on key production launches.

Mr. Betts abruptly left Fiat Chrysler last year to pursue other interests. The move came less than a day after the car maker’s brands ranked poorly in an influential reliability study.

Note, the poor quality ratings that preceded Betts’ departure from Fiat Chrysler pertained especially to infotainment systems, which points to electronics vulnerabilities generally.

As they get into the auto business, Apple and Google will have the luxury that struggling combustion engine companies don’t have — that they’re not limited by tight margins as they try to introduce bells and whistles to compete on the marketplace. But they’d do well to get this quality and security issue right from the start, because the kind of errors tech companies can tolerate — largely because they can remotely fix bugs and because an iPhone that prioritized design over engineering can’t kill you — will produce much bigger problems in cars (though remote patching will be easier in electric cars).

So let’s hope Apple’s new employee takes this hacking report seriously.

GM’s New CEO: This Model Has Titanium Features

Mary Barra, CEO-General MotorsThe woman in the photo at the right has big titanium ovaries — not malleable brass or rusting iron. Do I know Mary Barra personally to attest to this fact? No. But I have a pretty damned good idea where GM’s new CEO has been, and it takes a pretty tough set of specifications to survive the road she’s traveled.

Like her I grew up in the I-75 corridor in Michigan, where much of the automotive industry’s OEM facilities and Tiers 1 through 3 suppliers could be found. Like her father, my father worked in the automotive business; if her household was like mine, there were copies of Car and Driver, Road & Track, machinist, tool-and-die, and metalforming magazines cluttering coffee tables or in dad’s man-cave. The smell of machine oil and the grit of metal chips are familiar, as are an ever-present collection of safety glasses, hearing protection, and greasy jumpsuits. Picture a garage like that in Clint Eastwood’s movie Gran Torino; I’ll lay good money her dad probably spent a lot of his free time between shifts in a home shop like that, and where she might have been found as well if he needed a hand or she needed a tool to fix something.

It was in her blood, I’m sure; I’ll bet she could taste it. I’m pretty certain this is why she went into engineering, and likely why she went to that particular private engineering school.

After working for a couple years as a high school engineering co-op student I had been accepted at the same school, but I went a different road, preferring business and then-nascent computing technology over engineering. My daughter, though, is at that school now. She could taste it, too; we have pictures of her at age nine, wearing safety glasses, proudly holding her first aluminum machined part. She’s the first person her dad asks for help when working on the cars at home.

I wish now I’d taken pictures of her the time she was so damned mad at her brother and his friend for accidentally breaking the sibling-shared PlayStation 2 console. She ripped it down, diagnosed it using internet research, fixed and reassembled it on her own in an afternoon.

Driven to identify and solve the problem — that’s what it takes to choose engineering as a career, particularly if you are a woman.

Sure, men too must be driven to pursue the same field, but they don’t face the hurdles that women faced then or even now, 30 years after General Motors’ new CEO first started college at the former General Motors Institute. Nobody ever questions a boy’s right to pursue engineering, or a man’s right to practice that discipline. Nobody ever questions the gender of a man with an engineering degree when he makes it to the pinnacle of the corporate ladder. Continue reading

The Internet Didn’t Kill the Middle Class; Laxity and Apathy Did

KodakBldgAtlanta_mcclanahoochie-Flickr_modIn tandem with the release of his book, Who Owns the Future?, Jaron Lanier’s interview with Salon generated a lot of hand-wringing across social media. It seems Lanier, one of our so-called intellectual visionaries, believes that the collapse of Kodak and its 140,000 jobs, and the rise of Instagram and its 13 jobs, exemplifies the killing field of the internet. Lanier theorizes good paying jobs that once supported a thriving middle class have disappeared as internet-enabled firms replaced them. As these jobs vaporized, so did necessary benefits. Here’s a key excerpt from the interview:

“Here’s a current example of the challenge we face,” he writes in the book’s prelude: “At the height of its power, the photography company Kodak employed more than 140,000 people and was worth $28 billion. They even invented the first digital camera. But today Kodak is bankrupt, and the new face of digital photography has become Instagram. When Instagram was sold to Facebook for a billion dollars in 2012, it employed only 13 people. Where did all those jobs disappear? And what happened to the wealth that all those middle-class jobs created?”

What a crock of decade-late shit.

Where the hell was Lanier in the late 1990s and early 2000s, when the U.S. manufacturing sector nose-dived due to government policies created by corporate-acquired elected officials and appointees?

It wasn’t the internet that killed the middle class. The apathy of intellectuals and the technology elite did; too few bothered to point out the potential repercussions of NAFTA and other domestic job-depleting policies. In the absence of thought leaders, corporatists sold the public and their electeds on job creation anticipated from globalizing policies; they just didn’t tell us the jobs created wouldn’t be ours.

It wasn’t the rise of digitization that killed the middle class. It was the insufficiency of protests among U.S. brain power, including publicly-funded academics, failing to advocate for labor and home-grown innovation; their ignorance about the nature of blue collar jobs and the creative output they help realize compounded the problem.

Manufacturing has increasingly reduced man hours in tandem with productivity-increasing technological improvements. It wasn’t the internet that killed these jobs, though technology reduced some of them. The inability to plan for the necessary shift of jobs to other fields revealed the lack of comprehensive, forward-thinking manufacturing and labor policies.

It all smells of Not-My-Problem, i.e., “I’m educated, technology-enabled, white collar; those stupid low-tech blue collar folks’ jobs aren’t my problem.”

Until suddenly it is. Continue reading

Government Teat-Sucking Bankster, Steven Rattner, Calls Auto Bailout “Un-American”

I’m sure someone thought it was a good idea to trot out Steven Rattner to spin the government’s announced plan to sell its GM stake.

But I don’t know how anyone thought a bankster–and particularly this bankster–could say this and still wield any credibility.

From Washington’s point of view, divesting its remaining shares will end an uncomfortable and distinctly un-American period of government ownership in a major industrial company.

Sure. Rattner places this sentiment in “Washington’s point of view.” Still, consider the messenger.

After all, he barely mentions here–as he did in his book–that this was not just a bailout of some industrial companies. It was also a bailout of two finance companies, Chrysler Finance and GMAC (he mentions that the government still owns Ally/GMAC, but still calls the scorecard, “nearly complete”). As such, it was also the bailout of the Private Equity firm, Cerberus, that had spent the previous years stripping Chrysler in the hopes of retaining just the finance arms.

He also neglects to mention that the government still pursues the un-American policy of treating banks according to a different set of rules, not only providing them free money, but seemingly exempting them from all laws.

Finally, he shows no self-awareness of his own history, including paying kickbacks so his firm could make big money off of New York State (for which he, like all banksters, got a mere wrist-slap).

I’m not saying the government should hold onto its GM stake forever (though unlike Rattner, executive compensation is the last reason I’d cite to applaud this sale). But having someone like Rattner call government intervention in purportedly capitalist companies un-American only perpetuates the idea that industrial companies should have to abide by so-called rules of capitalism that the titans of capitalism, the banksters, have all but discarded.

Why Does Matt Yglesias Hate Exports, Innovation, and Productivity Growth?

I was interested to read this post from Matt Yglesias, which purports to prove that “nothing will bring back manufacturing employment.” Yglesias’ logic is that overall manufacturing employment is falling, largely because of more automation, and so we should stop pushing manufacturing in this country because it doesn’t get us the nice things in life. Here’s his key graf, which I’ll return to.

If you think about what the typical American family needs more of, it’s not manufactured goods. People need cures for illness and educational opportunities for their kids. They need more time to spend on leisure activities and with their family. They need jobs they enjoy. The idea of promoting more widespread affordability of health care services by boostering the share of the population that works in factories is a bizarre Rube Goldberg mechanism compared to directly focusing on improving the health care sector’s ability to deliver useful treatment to people.

Before I get there, though, compare the graphic he uses for his post:

And the one in the McKinsey report he claims supports his argument:

See what he left out? The bit where his chosen source says,

Manufacturing contributes disproportionately to exports, innovation, and productivity growth.

That is, Yglesias stripped McKinsey’s title describing how important manufacturing is to a successful economy, including one that (if workers have some kind of workplace power, which is a big if) contributes to them having time to spend with their families and enjoyable jobs.

Continue reading

Coming To America: Formula One Is In Austin

It has been a very long week. Time to let loose. For a change, we open up with with the Formula One circus. For the first time since the not much loved race in Indianapolis gave up the Brickyard ghosts in 2007, Grand Prix returns to the United States. The setting is the newly constructed Circuit Of The Americas in Austin Texas.

This is pretty exciting stuff. Grand Prix needs to be in the US, but has not had a venue that felt right since leaving Long Beach due to a tizzie between Bernie Ecclestone and the local promoters over the licensing fee. The US venues since then, including Detroit, Las Vegas, Indianapolis and, yes, even a forgettable three year stint here in Phoenix, just never felt right. But there is a ten year agreement to stage the race at Circuit of the Americas, and the hope is for stability.

The promoters and F1 have trotted out Mario Andretti to rave about the new facility but, from what I saw of it during practice yesterday, it looks butt ugly to me. Coming two weeks after a stop at the opulent and gorgeous Abu Dhabi Yas Marina Circuit, the dustbowl cheap blight of COTA is embarrassing. Austin is a great city, maybe COTA will grow into something worth while with a little age, let’s hope so.

As for the race, so far – as expected – the Red Bulls are fast. Vettel, Hamilton and Alonso, in that order, seem to be ahead of the pack early. The final practice is live on Speed starting at 10 am EST and qualifying starting at 1 pm EST, also on Speed. Coverage of the actual race starts at 1:30 pm Sunday, again on Speed. I will say this much, while the facilities and surrounding land look a little Continue reading

Creeping Unemployment in the New Battlegrounds: PA and MI

The big news of the campaign, once you get beyond Mitt’s kabuki storm assistance and auto bashing, is that PA and MI are battlegrounds again.

Maybe.

First, Restore Our Future PAC announced $2 million ad buys in both states.  The the Obama campaign announced they’d buy ads as well.

Today, the Detroit News has a poll showing Mitt within 2.7% of Obama (though polling ended on the 29th, when Mitt’s deceitful auto binge began). In fact, while Romney and Ryan were “not campaigning” yesterday, Ann Romney was, here in Grand Rapids.

Some commentators suggest this is just Mitt’s effort to open up new battlegrounds as it becomes clear he won’t win OH and might not win VA (or FL, but that would be game over for him). That is, Mitt has to look viable, and by moving into MI and PA, he can sustain narratives that he still has a shot.

That may be what’s going on.

But it pays to look at what has been going on with the unemployment rate in both MI and PA (I’ve included OH for comparison and MN because it often gets thrown into these discussions).

MI’s unemployment rate is up 1% off its recent low in April (the downtick this month, and some of last month’s uptick, is probably due to the way the auto companies handled model year layoffs). Part of the uptick is probably due to Rick Snyder’s austerity plans; part is probably due to Obama’s failure to provide real mortgage relief.

PA’s unemployment rate is up .8% from its recent low in May. Here, too, Republican governor Tom Corbett has pursued austerity measures. In addition, PA is exposed to the Euro-related decline that has hurt much of the Northeast.

The point, though, is that both these states have the makings of a battleground state–including a white working class population that can swing with economic tides–plus rising unemployment. Obama is still ahead in both. A few more ads about the auto bailout–indeed, Mitt’s deceitful attacks on GM and Chrysler generally–will probably move MI back towards Obama. And the Philadelphia area was spared the worst of Sandy, staving off the possibility that Pennsyltucky would have unimpeded voting while the Democratic Southeast would have floods. So it’s still most likely Obama will win both by comfortable margins.

But one thing makes movement towards Mitt more realistic here than in, say, MN. The economy is getting worse again. And in spite of all Mitt’s unforced errors in recent days, and in spite of the way that Snyder and Corbett’s state level policies–which mirror those Mitt would adopt at the federal level–have almost certainly exacerbated unemployment, voters may still turn to Mitt as an alternative to a stalled recovery.

Mitt’s play in MI and PA is probably a ploy to look viable. But there are a lot of unemployed workers in both states who will help him along.

Why Does Mitt Hate Profit?

[I posted substantially this post yesterday, but the BlogGods ate it along the way. So I’m reposting.]

Along with the deceitful attack on Italians who make better car company owners than GOP Private Equity types and the Lee Iacocca spin, Mitt has rolled out a radio version of attack on the auto bailout. From Greg Sargent, here’s part of the script:

Barack Obama says he saved the auto industry. But for who? Ohio, or China? Under President Obama, GM cut 15,000 American jobs. But they are planning to double the number of cars built in China — which means 15,000 more jobs for China.

And now comes word that Chrysler plans to start making jeeps in — you guessed it — China. What happened to the promises made to autoworkers in Toledo and throughout Ohio — the same hard-working men and women who were told that Obama’s auto bailout would help them?

The ad continues Mitt’s deceptive insinuation that GM and Chrysler aren’t also adding jobs in the US, which they are doing.

But it does something else. It takes a decidedly anti-profit stance.

You see, there are two reasons car companies are so gung-ho to enter (or re-enter, in the case of Jeep) the Chinese market. First, because it’s growing; when I was working in China, auto people considered the rising Chinese middle class to be 300 million–almost an entire US full of population. And most of them were just aspiring to buy their first car. That’s a whole lot of first time car buyers to sell to, as compared to US consumers, who are driving less and replacing their cars at a slower pace given more durable cars.

The other reason to go to China? Profit margins are bigger there than here. When I was in Shanghai in the mid-2000s, the profit margin on Buick Regals was about $2,000, as compared to the roughly $200 profit margin on a similar car here. The margins are closer now (because manufacturing in the US has gotten cheaper and in China has gotten more expensive), but China still offers good profit margins. Selling Buick Regals or Jeeps in China allows GM and Chrysler to accept lower margins on cars here.

By selling high margin cars in China, US companies can be more competitive here, meaning they will be able to expand sales and therefore production here, too.

All this is implicit in Sergio Marchionne’s response to Mitt’s ignorant rantings.

Together, we are working to establish a global enterprise and previously announced our intent to return Jeep production to China, the world’s largest auto market, in order to satisfy local market demand, which would not otherwise be accessible. Chrysler Group is interested in expanding the customer base for our award-winning Jeep vehicles, which can only be done by establishing local production. This will ultimately help bolster the Jeep brand,and solidify the resilience of U.S. jobs.

Marchionne notes 1) you can’t sell in China unless you build in China, 2) selling in China makes the Jeep brand stronger, 3) making the Jeep brand (and its profit margins) stronger makes it easier to keep up US production.

Marchionne’s implicit point should be where this discussion is heading: free trade hasn’t worked out to be fair trade. China–and Japan and Korea–still protect their markets, meaning if you want to sell there, you’ve got to make cars there.

Mitt has promised to get tough on China. But his series of auto ads have made no mention–not a peep!–of how he’ll reverse this practice and make it possible for Jeep to export cars made in Toledo. Indeed, when Obama launched a trade dispute over auto parts in September, Mitt scoffed at the effort (and ignored Obama’s decent and sustained effort launching trade disputes, one of which pertaining to specialty steel recently won at the WTO).

“The president may think that announcing new trade lawsuits less than two months before the election will distract from his record, but American businesses and workers struggling on an uneven playing field know better,” Mr. Romney said in a speech to the Hispanic Chamber of Commerce in Los Angeles.

Mitt Romney wants to attack American companies for going where profits are. And he’s doing so without discussing why that’s necessary.

That makes him neither a tough guy nor a good businessman.

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