Chart: Lyft's Projections Don't Bode Well for Auto

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General Motors is Cutting Production Volume

Two weeks ago we asked whether there'd be an uptick in auto distress. We didn't really even touch on to what degree ride-sharing will impact car ownership though we did point out GST Autoleather's assertion in its bankruptcy papers that Uber and Lyft have had an affect on OEM production levels. Well, this doesn't bode well for suppliers then. Take this chart for what it is: a bit of marketing, a bit of projection. After all, it is from Lyft directly and, of course, they want to show "up and to the left." Still, just imagine what this means if true.

Notably, General Motors ($GM) reported numbers this past week that surprised to the upside and the stock popped. They did discount heavily, but whatevs. Significantly, GM also noted a 26% decline in production. That, too, to our point, cannot bode well for the players in the auto supply chain. Keep an eye on auto - 3% GDP growth notwithstanding. 

Source: Lyft

Source: Lyft

Disruption (Google, Apple, Facebook, Amazon)

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Though somewhat redundant given prior pieces he's written, Benedict Evans doubles-down on why so much disruption is going to come from the Big Four. In a word: scale. In another: mobile distribution. Still, it seems - maybe in light of the recent Russian ad-buying scandal - that people are more focused than ever on the Big Four (Five, if you want to include Microsoft ($MSFT)). Indeed, here, The New York Times highlights how even massive companies like Snapchat ($SNAP) andUber are struggling to deal with the behemoths. On point, Google, which has previously invested in Uber, announced earlier this week a $1b investment in Lyft. Snapchat, meanwhile, much to the chagrin of pundits, is marketing an $80 dancing hot dog costume for Halloween. On one hand, it's brilliant to create consumer products based on your digital product. On the other hand, however, when your target market is the millennial, an $80 price point for a Halloween costume strikes as a, uh, a bit rich maybe...?

Long Regulatory Disruption of "Gig Economy" Disruption

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P.S. What Happened to Unicorn Homejoy LLC? 

Busted Tech? (Long Regulatory Disruption of Disruption). There are, what, 183929 Uber-for-X style companies today offering everything from weed delivery to in-home massages...? Most of these companies - Uber and Lyft included - are built on the 1099-economy where "gig" workers are framed as contractors rather than employees. Given that these companies are struggling to be profitable to begin with, it's especially helpful for these companies to avoid outlays for overtime pay, health insurance, worker's compensation, and other W-2 employee-related expenses. Except now, for the first time, a challenge to this model is seeing its day in court as a GrubHub Inc. ($GRUB) employee is suing for reimbursement of wages. Uber and Lyft have both settled prior (similar) suits out-of-court. Instacart, Caviar and Postmates have also been sued. A similar lawsuit, in part, forced Homejoy LLC into an assignment for the benefit of creditors in August 2015 and Chapter 11 in late-2015.* Which is to say that many companies - of GrubHub's status and otherwise - will be watching this fight closely as it has potentially existential ramifications for the gig economy going forward. Sometimes moving fast and breaking things runs into a regulatory roadblock.

* We thought it made sense to dive a bit deeper into what ultimately happened to Homejoy LLC, which, for the uninitiated, was at one time a Y-Combinator darling valued over $1b (after approximately $64mm of funding). Why? Because more often than not companies are celebrated on the way up and quickly forgotten after they come crashing down. It should be noted what happened to the company, its employees, and its assets after the crash. Here is what we know from the bankruptcy filing and otherwise:

  • Per Re/Code, Google hired "around 20 members of Homejoy's product and engineering team." Notably, Google Ventures was one of the largest creditors of Homejoy's bankruptcy estate - to the tune of approximately $18mm. 
  • Per the company's court filing, the Google hire occurred in July 2015 and the purchase price had to be several million dollars because it subsumed not just the tech team, but enough "consideration" to payoff the company's secured credit facility from Silicon Valley Bank, fund the wind-down AND leave money in the bankruptcy estate for a liquidating trust. See below. 
Company's Bankruptcy Disclosure Statement, filed 9/15/16. 

Company's Bankruptcy Disclosure Statement, filed 9/15/16. 

  • The company sold its customer list, service provider list, trademarks and domain names to entity called ABAP Holdings Inc. Some may recall that this transfer wasn't without its own controversy. The total purchase price was $100k.
  • The company sold its remaining office equipment for $20k.
  • The company seemingly tried to sell its source code but apparently was unable to find a buyer as the bankruptcy docket reflects no motion filed with the Bankruptcy Court seeking approval of said sale.  
  • The company would have managed the wind-down without a chapter 11 filing were it not for the "gig economy" lawsuits. It is unclear whether payments were ever made to the plaintiffs out of the liquidating trust or, if so, for how much. 

Clearly this wasn't the ending that Google Ventures, First Round Capital, Andreessen Horowitz and others wanted. 

9/17/17 Update. Apparently that gig economy lawsuit with massively disruptive potential didn't get off to a hot start for the plaintiff.

Fast Forward (Highway to the Danger Zone) $HOG

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Who doesn't like a good dose of Kenny Loggins? Dude is a bada$$. Nothing gets a party going like Footloose. But we digress. Apparently nobody wants to arrive to the party as the "big dog rider" of aHarley Davidson ($HOG) rig anymore. Another victim of Uber and Lyft? US sales were down 3.9% and the company got downgraded this week. We wonder how leather sales are doing.

Food CEOs Biting the Dust

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So Travis Kalanick is out and those of you who actually cared can now switch your corporate accounts back to Uber from Lyft. Congrats. Starwoodspoints! Anyway, ICYMI, mere days after the Amazon/WholeFoods announcement, the CEOs of both Fresh Market and Bi-Lo were replaced. Clearly the Board of Directors at both felt like a shape up was needed for the bloody war to come.