Nov 27, 2018

Axios AM

By Mike Allen
Mike Allen

🗽 Good Giving Tuesday morning from New York.

1 big thing: Look for more car factories to close

Illustration: Sarah Grillo/Axios

GM is laying off 14,300 employees. It's shuttering five factories in the U.S. and Canada, and says that two more closings will be announced internationally. By next year, it will no longer make the Buick LaCrosse, the Chevrolet Impala, or the Cadillac CT6 sedan. It's even killing the Chevy Volt plug-in hybrid.

  • Welcome to the modern car industry, which is full of bad news, report Axios' Felix Salmon in New York and Joann Muller in Detroit.

The big picture: All the top-selling sedans in America — the Toyota Camry, Honda Civic, Honda Accord, Toyota Corolla, Nissan Altima, and Nissan Sentra — are Japanese.

  • Why it matters: American carmakers can't compete, and are giving up that segment of the market. Instead they're concentrating on trucks, SUVs, and crossovers, which have higher profit margins and growing demand.

What's next? Almost certainly, even more job losses.

  • Car factories are at their most efficient when they run at full capacity. Right now America is capable of producing many more vehicles than there's demand for — roughly 3.2 million vehicles per year, according to Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research. (GM accounts for about 1 million of that.)
  • The logic of efficiency means that yet more factories are likely to close.

President Trump's trade war and steel tariffs are costing the industry billions, including roughly $700 million in higher steel prices at GM alone. Very few big automakers have avoided problems:

  • Ford has already announced that it is effectively getting out of the car business. By 2020, it will no longer sell the Fiesta, Taurus, Fusion or Focus in North America. Only the Mustang will remain, along with a crossover called the Focus Active.
  • Tesla CEO Elon Musk told "Axios on HBO" that the entire company was "within single-digit weeks" of death — in need of layoffs or new financing — earlier this year.
  • Nissan CEO Carlos Ghosn, after trying to push through a merger with France's Renault that neither company really wanted, is now sitting in a Japanese jail. A Nissan whistleblower told Japanese authorities that Ghosn was being paid tens of millions of dollars in undeclared income. (Wall Street Journal editorial: "The Ghosn Inquisition")
  • Fiat Chrysler is struggling after the death of its charismatic leader, Sergio Marchionne, who never achieved his longstanding dream of merging with GM.
  • Volkswagen, which has also seen a senior executive arrested, has set aside $30 billion to cover costs associated with its Dieselgate scandal.

What to watch: The future of car-making might be grim, but stock market investors are excited about self-driving cars and mobility as a service.

  • That market logic is putting pressure on carmakers to pour billions into R&D. It's also driving strategic investments in everything from AI to electric scooters.
  • The result: A major secular employment shift away from unionized factory workers and Detroit middle-management lifers. Expect the United Auto Workers, still GM's largest shareholder with a $3.6 billion stake in the company, to remain extremely unhappy for the foreseeable future.

How it's playing ... Financial Times front page, "GM deals blow to Trump heartland" (subscription).

2. Misinformation bots are smarter than we thought

Illustration: Aïda Amer/Axios

Bots spreading misinformation are using more sophisticated techniques, like going after specific human influencers and targeting misleading information within the first few seconds of it being posted, Axios' Sara Fischer reports.

  • Why it matters: New studies suggest that bots are getting more adept at gaming social platforms, even as the platforms are making changes to weed them out. Bots are also getting better at avoiding detection.
  • Be smart: This is the future Elon Musk warned us about Sunday on "Axios on HBO."

After the 2016 election, researchers tried to understand the role bots played in spreading misinformation. What they found is that bots have been steps ahead of gaming the web for some time — in particular, social platforms like Twitter and Facebook — using a few key tactics:

  1. Focus on speed: The spread of low-credibility content by social bots happens very quickly, according to a new study from Indiana University published in Nature Magazine.
  2. Using specific targets: Bots increase exposure to negative and inflammatory content on social media in part by targeting specific people, according to a new study from the Proceedings of the National Academy of Sciences (PNAS).
  3. Elevating human content: Bots aim to exploit human-generated content, because it is more prone to polarization, according to the PNAS study.
  4. Targeting original posts, not replies: Bots spread low-credibility content that is created through an initial tweet or posting, according to the Nature study.
  5. Gaming metadata: Bots are using more metadata to mimic human behavior and thus avoid detection, according to a new study from Data & Society, which receives funding from Microsoft. As platforms get better at detecting inauthentic activity, bots are using metadata — photo captions, followers, comments, etc. — to make their posts seem more human-like.

The bigger picture: Most Americans say they can't distinguish bots from humans on social media, according to a recent Pew Research Center survey.

  • What's next? Social platforms have been trying to reduce the content-elevating signals that are easily gamed by bots. Twitter, for example, has made follower counts appear less prominent on its iOS app by making the font size smaller in a new redesign effort, per The Verge.
3. Absent pardon, Manafort could spend life in prison

Former Trump campaign chairman Paul Manafort continued to repeatedly lie after his plea agreement, special counsel Robert Mueller said in a stunning filing last evening.

  • "Prosecutors ... said Mr. Manafort’s 'crimes and lies' ... relieve them of all promises they made to him in the plea agreement. But under the terms of the agreement, Mr. Manafort cannot withdraw his guilty plea," per the N.Y. Times.
  • Why it matters, from WashPost: "Mueller’s team may have lost its potentially most valuable witness."

MSNBC's Chris Hayes said this "sure looks like a last-minute play to be pardoned."

  • Ron Klain added later on MSNBC that we're "one step closer to a constitutional crisis": If Trump pardons Manafort, "that really is smack dab in the middle of a president essentially pardoning himself for cooperating with a foreign power in the presidential campaign."
  • "The crescendo is building. The music is rising here. We're headed to something very significant here in the next few days."

P.S. ... N.Y. Times, 45 years ago today: "President Nixon's personal secretary, Rose Mary Woods, testified in Federal District Court in Washington that through some 'terrible mistake' she had pressed the wrong button on her tape recorder and thus caused an 18‐minute 'gap' on one of the subpoenaed Watergate tape recordings."

4. Pic du jour
Carolyn Kaster/AP

The White House's Christmas decorations, unveiled yesterday at a press preview, include this gingerbread house in the State Dining Room, showcasing the full expanse of the National Mall — the Capitol, the Lincoln Memorial, the Jefferson Memorial and the Washington Monument, plus the White House.

  • The pastry sculpture includes 225 pounds of dough, 25 pounds of chocolate and 20 pounds of white icing, per AP.
5. Democrats smash Watergate record for House popular vote

"Democrats won the House with the largest margin of [raw votes] in history for either party," NBC's Jane Timm writes.

  • "Of the more than 111 million votes cast in House races nationwide, Democrats took 53.1 percent — retaking control of the House of Representatives ... — while Republicans received 45.2 percent."
  • "Democratic House candidates currently hold an 8,805,130 vote lead over Republicans. ... [That] smashes the previous record of 8.7 million votes in 1974, won just months after President Richard Nixon resigned from office in disgrace amid the Watergate scandal."

Looks like House Dems will pick up 4-0 ... "Democrat T.J. Cox slipped past Republican incumbent David Valadao ... to take the lead in the country’s sole remaining undecided congressional race, positioning Democrats to pick up their seventh House seat in California and 40th nationwide." (L.A. Times)

6. "Touchdown confirmed!"

A replica of the InSight Mars lander is on display at the NASA Jet Propulsion Laboratory in Pasadena, Calif. (Frederic J. Brown/AFP/Getty Images)

"Minutes after touching down on Mars, NASA's InSight spacecraft sent back a 'nice and dirty' ... dust-speckled image [that] looked like a work of art to scientists," AP Aerospace Writer Marcia Dunn reports:

  • "A better image came hours later and more are expected in the days ahead, after the dust covers come off the lander's cameras."
  • "The spacecraft arrived at Mars after a perilous, supersonic plunge through its red skies that took just six minutes."

"'Touchdown confirmed!' a flight controller called out just before 3 p.m. EST, setting off jubilation among scientists at NASA's Jet Propulsion Laboratory in Pasadena, Calif., who had waited in white-knuckle suspense for word to reach across 100 million miles of space."

  • "Because of the distance between Earth and Mars, it took eight minutes for confirmation to arrive."
Bill Ingalls/NASA via Getty Images

At the Jet Propulsion Lab, InSight team members Kris Bruvold (left) and Sandy Krasner cheer after receiving confirmation that InSight touched down.

7. Signs point to long haul on China tariffs
President Trump swats at fake snow dropping from the ceiling of a rally in Biloxi, Miss., yesterday for Sen. Cindy Hyde-Smith, who's on the ballot today in the last Senate race of the midterms. (Alex Brandon/AP)

Ahead of this week's G20 summit in Argentina, it's clear from an interview President Trump gave The Wall Street Journal — and from our own reporting — that his faith in tariffs is as strong as ever, per Axios' Jonathan Swan.

  • Trump believes to his core that tariffs work, both to create negotiating leverage and as instruments to improve the U.S. economy, though it's hard to locate many economists who agree with Trump on the latter point.
  • The bottom line: A former top trade official on Capitol Hill said after reading the interview: "My main takeaway is that maybe Wall Street needs to stop being so optimistic that Trump is going to negotiate away this China thing in the relatively near future. We are in for a long haul."

The interview's key exchange:

  • WSJ's Bob Davis: "[T]he Chinese No. 1 goal in this G-20 is to get you to delay or suspend that [increase in the tariff rate on some Chinese imports from 10 percent to] 25 percent on January 1. ... [A]re you willing to do that?"
  • Trump, who’ll meet Chinese President Xi Jinping at the summit: "I think it would be highly unlikely."

This suggests that, as Trump has been telling people he talks to regularly, he doesn't expect a breakthrough.

  • A breakthrough would mean any kind of deal — even a temporary one — to stop Trump from ratcheting up China tariffs in January, as he’s scheduled to do. 
8. New test for Trump: Confront Putin?
A Russian tanker on Sunday blocks the Kerch Strait, which separates the Crimean Peninsula from the Russian mainland. (AP Photo)

The Ukraine crisis presents an important new test for President Trump, Axios' Jonathan Swan reports:

  • At the UN Security Council yesterday, U.S. ambassador Nikki Haley called out Russia for Sunday's naval confrontation: "Impeding Ukraine’s lawful transit ... is a violation under international law. It is an arrogant act that the international community must condemn and will never accept."
  • But Trump said: "We do not like what's happening, either way."
  • And shortly after taking office, he seemed to side with Russia in comments on Ukraine.

Why it matters ... The N.Y. Times says there's a risk of a wider war:

  • "Ukraine’s president put his nation on a war footing with Russia ... as tensions over a shared waterway escalated into a crisis that dragged in NATO and the United Nations."

The big question: Will Trump say anything about Russia taking its aggression even further? Or will he normalize this rogue behavior?

  • The pressure from the national security establishment will be to call out Russia, while Trump's own instincts tend to favor Putin.
Courtesy N.Y. Post
9. Fox News addicts get new buffet
Left to right: "Fox & Friends" co-hosts Steve Doocy and Brian Kilmeade shoot pool as Fox Nation's "UN-PC" co-host Britt McHenry and Ainsley Earhardt watch. (Photo: Fox News)

Launching at 7 a.m. ET today ... Fox Nation, an on-demand, subscription-based service ($5.99/month) that will include a weekly video from conservative social media stars Diamond & Silk.

  • Fox News says there'll be 40-50 hours of new programming a week.
  • There won't be a set schedule because everything will be on demand.
  • The switch will flip with "Primetime Highlights" — key moments from last night, with co-hosts Carley Shimkus and Rob Schmitt.
  • Daily programming will end with a quiz show at around 7 p.m.

Axios media trends expert Sara Fischer says Fox News joins a very competitive field in the conservative news-streaming space.

  • But the reality is that this is an experiment for the Murdochs, who have successfully launched streaming services elsewhere around the globe.

The bigger picture: Fox News joins other networks in trying to build a direct-to-consumer video product that they can sell without going through pay-TV providers, which keep the data.

  • The consensus among analysts is that most networks don't have the scale to compete directly with streaming giants like Netflix or Amazon.
  • Instead, the streaming efforts create incremental revenue for the networks and help them expand their audiences. At this point, it's marketing. 
  • Go deeper.
10. 1 food thing
Mike Isabella (far right) at his Kapnos Taverna in Arlington, Va., in 2014 (Marvin Joseph/The Washington Post via Getty Images)

"The Inside Story of Mike Isabella’s Fallen Empire ... How alcohol, infighting, and a sexual harassment scandal turned the prince of DC dining into a pariah," by Jessica Sidman and Anna Spiegel in the December issue of Washingtonian (highlights courtesy senior editor Andrew Beaujon):

  • Isabella talks about his lifelong struggle with alcohol: "I’m an alcoholic drug addict. You know, I am. I’ll always be for the rest of my life."
  • In early spring, Isabella had a panic attack that sent him to the hospital. He says he’s stayed "pretty much" sober since.
  • It became habit for bartenders at Isabella’s restaurants to water down his drinks. "We would have to basically trick him," says a former manager.

Problems in Isabella’s company went beyond a sexual harassment lawsuit he settled with a former employee:

  • Deals from developers and money from a new generation of investors allowed him to expand so fast that the company’s infrastructure couldn’t keep pace.
  • The restaurant group was run in large part like a small family business governed by Isabella and his entourage, and didn’t hire an H.R. representative until last October.
  • The suit created a rift between Isabella and his partners, George and Nick Pagonis. A former manager says they stopped talking. The two factions are now at odds over who will control the company.

Dig in.

Mike Allen