Welcome to the Daily 5 report for Wednesday, Feb. 19.
Electricity pioneer Nikola Tesla died in 1943, but more than 80 years later his surname generates headlines around the world every day, if not every hour. And some days, both his first and last name make news.
Today was one of those days. Troubled Arizona electric truck maker Nikola Corp. filed for Chapter 11 bankruptcy — another once high-flying Tesla gold rush chaser whose fortunes plunged amid scandal, cash burn and disappointing demand.
The company's fourth CEO, Steven Girsky, has been a respected veteran executive in automotive circles, but his attempt to keep this company afloat the last few years was doomed. Here's why.
For a startup company such as Nikola to survive, it needs credibility. Early in its days as a public company in 2020, the shares skyrocketed and its market value reached about $29 billion. It was frequently featured on CNBC.
This company was so red hot that General Motors wanted a piece of the action. It sought an 11 percent stake in Nikola as part of a cash-free deal in exchange for providing access to fuel cell technology and for manufacturing the startup's electric pickup, the Badger. At the time Nikola said it couldn't make the Badger without a deal with GM. That deal failed late in 2020 and questions began to rise.
Then founder and CEO Trevor Milton became the center of a federal fraud scandal for misrepresenting the capability of a key truck product, as exposed by Bloomberg. Ultimately, he was indicted, found guilty and sentenced to four years in federal prison.
How can a startup survive after something such as this? Even without major existential scandals, other EV startups suffered the same fate as Nikola, including Fisker Inc., Lordstown Motors and Canoo Inc.
The sad thing is that there is still a long-term future for electric vehicles and hydrogen propulsion technologies. It's a good bet that someday a technology first developed by a failed company such as Nikola ends up being successful.
Meanwhile, the disappointing demand for EVs claimed 188 more jobs in the Detroit area today as supplier BorgWarner Inc. confirmed plans to close two small EV battery parts plants.
In the auto dealer world, TikTok today launched an ad platform for automakers and dealers, as reported by our affiliate Ad Age. The move underscores TikTok's continued bid to survive in the U.S. despite the risk of a shutdown over its Chinese ownership. The Trump administration has put the shutdown on hold, for now.
"Dealers and manufacturers have the ability to launch full-tier campaigns that connect national, regional and local strategies on TikTok," Ahmed Iqbal, TikTok's head of industry for automotive, said in the announcement.
Also in today's report, we have this story about Canada's Foundation Automotive selling Chevrolet of Mandan and Subaru of Mandan in North Dakota to Eide Automotive Group, which owns eight stores in North Dakota and Minnesota. We've got more dealership acquisition news coming tomorrow in our unrivaled coverage of buy-sell deals.
That's it for now. Have a great rest of your day.
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— Philip Nussel, online editor
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