Volkswagen’s $5 billion investment in a joint venture with electric-vehicle maker
looks desperate from a few different angles. But it makes perfect sense in the context of wider pressure across the auto industry, from Ford to
Tesla
.
Investors had a polarized reaction to the deal between the German auto titan and the U.S. EV fledgling on Wednesday, with Volkswagen shares slipping in Frankfurt while Rivian’s stock soared in the U.S. premarket.
For cash-strapped Rivian, an initial $1 billion injection from Volkswagen is a lifeline that would have been welcome from anywhere. Rivian has yet to turn a profit, and financial pressures have kept its models on the expensive end of EVs—not where you want to be as price wars pinch.
Those riding out a 90% decline since Rivian went public in 2021 can breathe a small sigh of relief. That includes
Amazon
,
its largest shareholder.
Volkswagen’s investors seem more critical. Rivian is a gamble, with the possibility that its cash hemorrhage doesn’t slow and becomes a going concern risk. But it still looks like the right thing to do.
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Legacy auto makers face a mortal threat from falling behind on EVs. Volkswagen and its European peers especially look like they fumbled the lead from the region’s early adoption of electric cars, leaving room for Chinese rivals to swoop in. The astonishing popularity of Chinese EVs in Europe is now a trade tension—and a cautionary tale for American auto makers over the costs of delaying EV ambitions.
Volkswagen hedged some China risk with a stake in
last year. That deal was the opener of a strategy to catch up on EVs through partnerships, with Rivian being the second act. It might seem unpalatable to investors, but that’s only because it’s strong medicine that could ultimately help Volkswagen, and maybe even Rivian, fend off Chinese rivals—an existential battle that faces all auto makers, including Tesla.
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German Auto Giant’s $5 Billion Electric Gamble
German auto maker
is giving U.S. electric vehicle start-up
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a shot in the arm, pledging to invest up to $5 billion in it as they start a joint venture focused on EV electrical systems. The move comes as EV makers have struggled amid slowing consumer sales.
- Volkswagen is putting $1 billion into the venture at first and will invest more by 2026. The venture will be equally controlled by the auto makers, giving Volkswagen access to Rivian’s software technology and Rivian access to the German company’s broader market reach as it develops newer, lower-priced models.
- Rivian doesn’t make money yet. Over the past two years, it has spent about $12 billion assembling and selling cars, generating around $7 billion in sales. Wall Street analysts forecast it to report a positive gross profit for the first time in the fourth quarter.
- Rivian’s lower-priced truck and SUV lineup, which it calls R2, is expected to hit roads in 2026. Right now, Wall Street expects Rivian to sell about 53,000 EVs in 2024, about the same as 2023. Its current models start at around $70,000, while R2 models could start around $45,000.
- Rivian CEO RJ Scaringe told The Wall Street Journal the EV maker now has enough money to fund its operations until it becomes a cash-generating business. The deal also could lower parts costs for Rivian by spreading the cost of Rivian’s software over more vehicles, the report said.
What’s Next:
’ robotaxi division Cruise named former Xbox and Amazon executive Marc Whitten as its new CEO starting on July 16. GM’s Craig Glidden will leave his role as chief legal officer to join Cruise to support Whitten while also being executive vice president and strategic advisor at GM.
—Al Root and Liz Moyer
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European Regulators Target Microsoft in Latest Antitrust Salvo
European antitrust regulators say
misused its market power by combining its Teams messaging and collaboration platform into its Office 365 and Microsoft 365 software, despite the changes the company already made. It’s the second time this week Europe has flagged tactics by American technology companies as anticompetitive.
- Microsoft gives its Teams platform a potential advantage over rival products such as
and
-owned Slack by tying it into its software suite, said Margrethe Vestager, the European Commission’s executive vice president in charge of competition policy.
- Microsoft Vice Chair and President Brad Smith said in an email that it appreciates the “additional clarity provided today and will work to find solutions to address the Commission‘s remaining concerns.”
- On Monday, the EU said
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had failed to comply with a new digital competition law, saying its App Store doesn’t let developers direct customers to alternative ways to make purchases. Apple couldn’t be reached by Barron’s, but told The Wall Street Journal it’s confident it complies with the law.
- The EU opened its investigation into Microsoft’s bundling of its Teams software after complaints last year from Slack Technologies and German videoconferencing company Alfaview. It’s the first antitrust case by the EU directed at Microsoft’s behavior in more than a decade, the Journal reported.
What’s Next: If the commission finds that Microsoft breached antitrust rules, the company faces a fine of up to 10% of its global annual revenue. Microsoft now sells Teams separately and could propose ways to address regulators’ concerns and avoid paying the fine.
—Janet H. Cho and Adam Clark
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Big Retailers Gear Up for Midsummer Mega Sales Fight
As consumers limit their spending at retailers, a summer staple is about to reappear.
and
are kicking off competing mega sales events in early July, hoping to grab a share of household shopping budgets before
Amazon.com
’s
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annual Prime Day sale on July 16 and 17.
- Target Circle Week is July 1-13, during which it plans to cut prices by up to 50% on thousands of items, including clothing, bedding and bath products, skin care, and suncare. Target is also offering members of its revived rewards club discounts on back-to-school items.
- Walmart’s event, which it calls Walmart Deals, runs from July 8 to July 11, with early access for its shopping rewards members. It is planning thousands of deals on home electronics, kitchen appliances, toys, and luggage, plus back-to-school apparel, uniforms, and school supplies.
- The competing sales are hitting as consumer confidence has weakened. The latest confidence index ticked down to a reading of 100.4 in June, from May’s revised reading of 101.3. While the labor market remains strong, consumers see near-term uncertainty for the economy.
- Amazon enlisted hip hop music celebrity Megan Thee Stallion to announce her Prime Day picks. This is the 10th annual Prime Day for the e-commerce retailer, though it has added sales days in the fall in recent years to kick off the holiday shopping season.
What’s Next: The consumer confidence index’s decline from May could show continued concerns about the health of the economy heading into the November election. The Conference Board said most of the decline in the reading from May to June was seen among consumers aged between 35 and 54.
—Janet H. Cho and Sabrina Escobar
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FedEx Beats Expectations and Sees Continued Momentum in 2025
beat expectations for fiscal fourth-quarter earnings and said it expects the momentum to continue in fiscal year 2025, projecting earnings of about $21 a share, also beating current projections. Spending was down for the 2024 fiscal year compared with a year earlier as cost-cutting efforts kicked in.
- The logistics and delivery company said profit rose 9.5% to $5.41 a share, and revenue rose 1% to $22.1 billion. It cited not only the cost-cutting but improved efficiencies and higher ground volume. Capital spending in fiscal 2024 was $5.2 billion, lower than the $5.7 billion it initially projected.
- FedEx CEO Raj Subramaniam called the results “unprecedented” in the current environment, including four consecutive quarters of expanding operating income and margin. FedEx is aiming to cut $4 billion from its expenses by the end of fiscal year 2025.
- Results include a noncash impairment charge of $157 million related to is decision to retire 22 Boeing 757-200 jets and seven related engines as the company updates its air fleet and aligns its air capacity with expected demand.
- FedEx is losing its contract with the U.S. Postal Service, the nation’s largest parcel delivery service, at the end of September. That business, which had contributed about $2 billion annually for the past two decades, is moving to
What’s Next: For fiscal 2025, FedEx projects low-to-mid single-digit percent revenue growth and adjusted earnings of $20 to $22 a share. FedEx has achieved about $1.8 billion of its overall cost-savings goal, leaving another $2.2 billion to go.
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Dear Quentin,
We are a healthy, retired couple (69 and 64 years old). We have always managed our own investments.
We currently have 60% in stocks and 40% in cash equivalents in our investment portfolio. Based on the “100 minus your age rule” we would be considered overweight in stocks; even at the newer version of “120 minus your age,” we are pushing it. However, we keep doing the math and don’t understand what we may be missing.
Our total net worth is $4.2 million. We have $300,000 in nonretirement funds (60% cash), $1 million in a home, retirement accounts with $1.1 million in CDs and $1.8 million in stock funds. We have no debt and live comfortably on $150,000 per year. My husband will begin taking Social Security of $55,000 per year in 2025, and I will collect about $28,000 per year in 2027.
In a worst-case scenario, a stock market bust could occur, or a significant downturn. In that case, we have 10-plus years of cash we can draw upon as the market recovers. Otherwise, we could continue to benefit from market growth and slowly whittle down the percentage of stock ownership as we age. Please let me know what I may have left out of our consideration.
—Healthy Boomers
Read the Moneyist’s response here.
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—Newsletter edited by Liz Moyer, Patrick O’Donnell, Brian Swint
