Musk or not, Tesla’s challenges remain
Tesla shareholders appear relieved that Elon Musk seems set to stay on as C.E.O., after the automaker’s chair denied a report that the board had explored finding his successor. Company shares are up in premarket trading.
But even if Musk — who has said he’s dialing back his government cost-cutting work — is sticking around, the company still faces operational and competitive challenges. And then there’s the question of how much time he can still devote to Tesla, and whether his plans for the company will work out, though Musk has a track record of proving his critics wrong time and again.
What Tesla is disputing: The Wall Street Journal reported that Tesla’s board had reached out to executive search firms about a month ago to work out a formal C.E.O. succession process. At the time, Musk was consumed with his work in Washington and Tesla’s sales and profits were dropping.
A statement posted on X attributed to Robyn Denholm, Tesla’s chair, called the report “absolutely false,” adding, “The CEO of Tesla is Elon Musk and the Board is highly confident in his ability to continue executing on the exciting growth plan ahead.”
Musk staying on doesn’t change the difficult position Tesla is in. Shares in the company have plunged sharply since December and remain volatile (though they’re still outperforming the S&P 500). Executives last week largely chalked up a 71 percent year-on-year drop in first-quarter earnings to retooling Model Y assembly lines. But the company faces growing competition, especially from lower-cost Chinese rivals, and a likely hit from tariffs.
Then there’s the question of whether political opposition to Musk is hurting sales and hiring. The Journal reports that a Tesla executive said it was getting harder to recruit new talent because of Musk and said it would be better if he resigned; that executive was reportedly later forced out.
How much time Musk will devote to Tesla is another question. During last week’s earnings call, the entrepreneur insisted that he would continue pushing Tesla to become the leader in autonomous vehicle taxi services. Before Denholm’s statement was published on X, Dan Ives, a research analyst and prominent Tesla booster, predicted on X that Musk would remain C.E.O. “for at least five years.”
But according to The Journal, Musk confided in an associate that he was still frustrated at working nonstop at Tesla, especially after his huge pay package had been repeatedly struck down in court. Musk also leads nearly a half-dozen other companies, including SpaceX, the newly combined xAI and X and Neuralink. And many analysts, and reportedly Tesla executives, question his robotaxi vision.
Ross Gerber, an outspoken Tesla investor and Musk critic, told Bloomberg Television that the billionaire should instead become the carmaker’s chair and let someone else take over — perhaps J.B. Straubel, a Tesla co-founder and board member who has reportedly been seeking to allay restive shareholders.
HERE’S WHAT’S HAPPENING
Apple is ordered to loosen its grip on its App Store. A federal judge in California, who rebuked the iPhone maker for thwarting a previous ruling in a lawsuit over control of the marketplace, told the company to stop collecting commissions on some app sales and accused some executives of lying in court. It’s a major victory for Epic Games, the Fortnite maker that has sought to challenge Apple’s and Google’s control of their app stores.
Washington and Kyiv strike a deal to share Ukraine’s mineral wealth. The agreement, announced on Wednesday, will create a joint investment fund, though details remain unclear. Ukraine supporters hope the pact will give President Trump a stake in the country’s fate, as the outlook for efforts to end Russia’s war there remain unclear.
Elon Musk suggests his cost-cutting team should examine the Fed. The billionaire said at a White House event that the so-called Department of Government Efficiency should “definitely” train its sights on the central bank, citing a costly overhaul of its headquarters. (The Fed finances itself with income from securities it holds.) It’s the latest instance of Trump and his allies taking aim at the Fed.
The economy started shrinking before Trump’s tariffs
The uncertainty gripping corporate America as a result of President Trump’s tariffs hasn’t hurt the tech giants — too much. Microsoft recorded big quarterly gains, and Meta’s first-quarter revenue beat investor expectations.
The results lifted markets after hours. But they contrasted sharply with new — and dismal — economic data from some of the world’s largest economies.
Recap: The U.S. economy shrank in the first three months of the year, the first period of negative growth since the first quarter of 2022. The data covers the period just before the bulk of Trump’s tariffs took effect but reflects worry about his trade policies. (Trump blamed former President Joe Biden for reading.)
In China, export orders plummeted in April to the lowest levels since 2022, and a measure of the country’s factory activity also fell. And on Wednesday the Bank of Japan cut its economic growth forecast, citing trade fights.
One bright spot: U.S. inflation cooled in March.
Worth noting: There was a lot of noise in the latest figures. Trump’s tariff threats set off a huge drop in net exports, cutting nearly five percentage points off G.D.P.
The report is unlikely to change the Fed’s wait-and-see approach to lowering interest rates, Paul Stanley, the head investment officer at Granite Bay Wealth Management, wrote in a research note. Economists were expecting a contraction in the first quarter, and the markets were already pricing in a downturn in growth.
Across almost every industry, businesses have withdrew their financial forecasts, scaled back growth estimates and warned of higher costs. Just in: General Motors lowered its full-year profit outlook, citing a multibillion-dollar hit from tariffs, and McDonald’s reported that global same-store sales, particularly in the U.S., were down in the first quarter.
Trump is widely expected to sew up new trade agreements, but the White House’s vague pronouncements on deal talks and the president’s continued attacks on business leaders have made corporate planning nearly impossible. (Washington recently contacted Beijing to start trade negotiations, according to Chinese state media.)
Many economists say that things are about to get worse. “Unless there is a quick unwinding of the tariffs now hitting the economy, a recession will take place in midyear,” Joseph Brusuelas, the chief economist at the consulting firm RSM US, wrote in a note.
Bill Adams, the chief economist for Comerica Bank, told DealBook that “the economy has clearly been changing trajectory in the last couple of weeks in a way that makes last quarter’s G.D.P. report feel much less relevant.”
Inflation picking up in the first quarter, and overall uncertainty, could forestall hiring, Adams added. Some might consider that the perfect recipe for stagflation.
What to look for next: Given the stark changes to the economy in April, the jobs report due out on Friday will be closely watched, especially by the Fed. Economists forecast an addition of about 130,000 jobs, down sharply from the 228,000 added in March.
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Rory McIlroy teams up with TPG
Fresh off finally securing a career grand slam with a thrilling win at the Masters, Rory McIlroy, the world’s second-ranked golfer, is rounding out another corner of his life: investing.
McIlroy’s investment firm, Symphony Ventures, is joining forces with the private equity firm TPG to start TPG Sports, an investment fund that will place bets on businesses across the sports industry, DealBook is first to report.
“Sports is undergoing a big transformation,” McIlroy told DealBook. “There is a lot of investment going into the sports world and trying to make it more professional — and trying to bring it into the 21st century.”
McIlroy has a long track record in investing. He started Symphony Ventures with Sean O’Flaherty, his business partner, in 2019. (Both men will be operating partners for TPG Sports.)
Investments by Symphony Ventures include Golf Genius, a golf tournament software platform, and Puttery, an immersive mini-golf experience. In 2022, McIlroy also co-founded a company that helped create TGL, the team-based high-tech golf league with investors that include Arthur Blank and Steve Cohen.
McIlroy’s investment focus led him to TPG. The firm brought him on as an investor in some of its previous deals, like its buying a stake in the golf course management company Troon in 2021.
TPG brings to its sports bet extensive experience in media and other related industries, through deals with DirecTV and Creative Artists Agency.
TPG is making its official foray into sports as investors face a volatile landscape, with President Trump’s tariffs rattling the stock market and analysts saying a recession is becoming more likely.
“Probably the best opportunities that we’ve seen and invested in over the past 30 years have also come at moments of uncertainty,” said Todd Sisitsky, the president of TPG. The firm is starting TPG Sports with a secured investment commitment from Lunate, an investment fund based in Abu Dhabi.
The world still speaks U.S. dollar
The U.S. dollar has fallen about 9 percent in the past three months, according to an index that tracks its performance against a basket of major trading partners. Not since the 1970s has the currency performed so badly in a president’s first 100 days.
The drop isn’t surprising. The U.S. economic outlook is far cloudier than it was on Inauguration Day, as President Trump’s tariffs set the stage for slower growth and higher inflation. U.S. assets look far less attractive now.
But could there be something more existential afoot? Questions are swirling about the dollar’s global standing and whether after more than seven decades as the world’s most important currency, it’s on the cusp of shedding that status, Colby Smith writes for DealBook.
Trump’s policies and his threats to longstanding norms like the political independence of the central bank have prompted a rethink among investors about how much more exposure they want to have to U.S. assets. That skepticism looks likely to endure. “Something is in motion that is irreversible,” said Jens Nordvig of research firm Exante Data.
There are obvious caveats. Just because the dollar is weaker now, that does not mean it has lost all of its primacy. A sudden shift away from the United States still seems far-fetched because there are few places to go.
“The rest of the world is eager, if not desperate, to reduce reliance on the dollar as a payment and reserve currency,” said Eswar Prasad, a former official at the International Monetary Fund who is now at Cornell University. Attempts to weaponize the dollar through policies like sanctions would be less potent, and having multiple sources of liquidity during times of stress could make for a less fragile global financial system, some currency experts say.
“The reality though is that there are no robust alternatives,” Prasad said.
The euro is perhaps best positioned to eventually seize the opportunity created by Trump. It is a widely used and favored currency among central banks. There are now more euro-denominated safe assets available, as Germany and other countries increase spending. And the European Central Bank has also shown more willingness to serve as the region’s lender of last resort, a crucial function for an international currency.
When would the euro become a reserve currency? “We’re at the best position to become one in some years,” Luis de Guindos, the E.C.B.’s vice president, said recently. But there would have to be much more meaningful economic, financial and regulatory integration across Europe for that to happen. It will take time.
Other alternatives like China’s renminbi face even higher hurdles. Investors cannot transact freely in the country’s financial markets because of capital controls, and the currency is heavily managed by the government — two insurmountable barriers to the Chinese currency assuming a more global role.
Shifting away from the dollar presents as big a challenge as trying to shift the world away from using English, said Stephen Jen, a currency expert who runs Eurizon SLJ Capital.
“People can bicker on whether French is more beautiful or German more precise, but none of that matters — when more people speak English, more will learn to speak English,” he said. “Dollar liquidity is deep. No one administration can destroy the dollar, certainly not President Trump in 100 days.”
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