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(Bloomberg Opinion) -- The SpaceX Crew Dragon capsule that’s orbiting the Earth with two U.S. astronauts is the picture of New Space Age glamour. It’s a sleek, stylish commercially made capsule that’s destined to be featured beside Italian sports cars in future design textbooks. Just don’t tell that to Elon Musk, SpaceX’s chief executive and chief designer. “Is a Ferrari more reliable than a Toyota Corolla or a Honda Civic?” he once asked a space journalist. The answer, of course, is that the simpler sedans are far more reliable than the well-crafted sports car. So SpaceX, Musk made clear, was going to make Corollas.It’s a practically minded outlook for a company founded on the galactically large ambition to transform humanity into a multiplanetary species. But Musk and SpaceX implicitly understand something that national space programs haven’t really accepted: Success in space exploration isn’t, ultimately, about achieving “firsts” like the moon landing. Rather, it’s repeat business that will establish moon colonies and Musk’s Martian city. To get that business, SpaceX has to show that national space programs, with their expensive, Ferrari-like rockets, capsules and contractors, won’t get there. On Saturday, it succeeded.The 20th century space race wasn’t about the money, it was about the record books. The respective financial strengths of the U.S. and Soviet systems certainly played a role, but when national pride is at stake, performance matters more than costs. For decades, NASA, in particular, internalized that priority by adopting cost-plus contracts with its contractors. Under these arrangements, NASA agrees to pay the value of a project’s development costs, plus an associated fee (often about 10%). It’s an excellent system for encouraging contractors to invest in difficult, long-term projects with hazy costs.But if the goal is to create something that works repeatedly, and on-budget, cost-plus is a problem. After all, if a contractor’s fees increase during project delays, then that contractor lacks an incentive to control costs and finish on deadline. Making matters more difficult, expensive government programs must meet political requirements that no profit-seeking business would ever consider. The development of the 1970s-era space shuttle was spread out over states and produced an outrageously expensive “reusable” rocket that took thousands of hours to prepare for reuse. In 2012, Musk correctly called the shuttle “a Ferrari to the nth power.”By that point, Musk, too, was working with the U.S. government. But unlike traditional NASA contractors such as the Boeing Co, he was doing it on a fixed-fee basis. So, rather than get paid along the way, SpaceX accepted a fixed fee to build a technology, and whatever wasn’t used in development could be kept as profit.That doesn’t mean cutting corners. NASA requires that SpaceX’s technology meet its high safety standards (often to Musk’s chagrin). But it does mean that SpaceX has a strong incentive to find ways to control costs while building cutting-edge technology. For example, rather than try to perfect a single rocket for a flawless first launch, SpaceX opted for iterative design, whereby it launched — and failed — early prototypes repeatedly, as a means to learn from its mistakes and speed up rocket design. It’s an approach that differs substantially from traditional aerospace companies, which spend years and money perfecting a design before flying it (the Ferrari approach). Likewise, SpaceX, freed from political constraints, concentrated its design and testing in single locations, rather than spread it out geographically. It’s what any rational for-profit manufacturer would do.This approach has been fruitful. The rocket that carried the Crew Dragon capsule into orbit is a Falcon 9, from a family of rockets developed for $390 million with assistance from NASA under fixed-price contracts. According to a 2011 NASA report, the cost would’ve been $1.7 billion to $4 billion if the same rocket had been developed using traditional means. More dramatically, the development of the Falcon 9 has reduced the cost of a space launch by a factor of 20, at least. A kilogram launched on the space shuttle, which last flew in 2011, cost about $54,500. A kilogram on the Falcon 9 runs about $2,700.Of course, launching humans into space is more difficult and expensive than launching cargo. Even so, SpaceX managed to lap more traditional contractors. In 2011, NASA announced plans to build the Space Launch System, a massive new rocket to send Americans back to the moon. To save on costs and time, the rocket was to be built using engines and other components from the space shuttle program. Ominously, it was also to be built by the Boeing Co under a cost-plus contract. In 2014, NASA committed to a November 2018 launch date at a cost of $9.7 billion. Then the launch dates started slipping, all to the benefit of Boeing. By March, the launch date had moved to the second half of 2021, with costs escalating to $18.3 billion. If and when it flies, each rocket will exceed $1 billion — more than three times what it cost to develop the Falcon 9.For now, SpaceX’s approach is the clear winner, but its challenges are far from over. Above all, the company must demonstrate that its relatively inexpensive human-capable flights have a commercial market — an idea that’s far from certain. Similarly, the company will need to prove the business case for its longer-term, and substantially more expensive, ambitious exploration program. But today, at least, the Musk’s Corolla is beating the Ferrari by millions of miles.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Adam Minter is a Bloomberg Opinion columnist. He is the author of “Junkyard Planet: Travels in the Billion-Dollar Trash Trade” and "Secondhand: Travels in the New Global Garage Sale."For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Nissan (NSANY) reports net loss of 671.2 billion yen in fiscal 2019, mainly due to the COVID-19 pandemic, which hurt the company's production, sales and other business activities in all regions.
The fortified alliance among Renault (RNLSY), Nissan (NSANY) and Mitsubishi focuses more on efficiency and competitiveness than on volumes.
What happened Shares of several global automakers were rising on Tuesday, as auto factories around the world continued to ramp up after shutting down in March amid the COVID-19 pandemic. Here's where things stood for these three companies' stocks as of 2:30 p.
Japanese automakers Toyota, Nissan and Honda said they are gradually restarting in Mexico as the nation's automotive industry reboots in line with a broader economic reopening, despite still-high numbers of new coronavirus cases. Mexican officials in mid-May said the automotive industry could exit the coronavirus lockdown before June 1 if approved safety measures were in place. Toyota Motor Corp and Nissan Motor Co Ltd told Reuters on Monday that they were preparing to gradually resume operations, and Honda Motor Co Ltd last Friday said it had begun a gradual return to operations.
Both Toyota (TM) and Honda (HMC) report dismal year-over-year results for fiscal fourth-quarter 2020, thanks to the coronavirus outbreak.
Toyota (TM) expects operating income to decline 79.5% year over year to 500 billion yen in fiscal 2021, which would mark the lowest profit in nine years.
Amid coronavirus-induced uncertainty and financial crisis, Honda (HMC) refrains from providing any dividend forecast and financial outlook for fiscal 2021.
Honda Motor (NYSE: HMC) said that its operating profit for the fiscal year ended March 31 was 634 billion yen ($5.9 billion), down 13% from the prior fiscal year, as the effects of the coronavirus pandemic hammered its results for the January-March quarter.
Image source: The Motley Fool. Honda Motor Co, Ltd (NYSE: HMC)Q4 2020 Earnings CallMay 12, 2020, 3:00 a.m. ETContents: Prepared Remarks Questions and Answers Call Participants Prepared Remarks: Watanabe -- Corporate PublicationsThank you very much for joining today for the broadcast meeting for the FY '20 and Fourth Quarter Financial Results meeting for Honda Motor Co.
Honda Motor Co <7267.T> on Tuesday posted its lowest operating profit in four years and refrained from releasing an earnings outlook for the current year because of uncertainty about the longer-term impact of the coronavirus on global car demand. Honda and other global automakers have begun gradually to resume operations at their vehicle plants, but face weak demand as job losses and concern about a global economic downturn weigh on consumer spending. Carmakers are also trying to cope with supply chain disruptions and social distancing measures to contain the coronavirus that are expected to limit output in the coming months.
While General Motors (GM) and BorgWarner (BWA) top first-quarter 2020 earnings estimates, Genuine Parts (GPC) falls short amid coronavirus woes.
Honda Motor Co said on Tuesday it has delivered 10 modified Odyssey minivans to the city of Detroit to safely transport healthcare workers and people potentially infected with COVID-19 for testing in one of the U.S. cities that has been hardest hit by the coronavirus pandemic. The minivans have been retrofitted with a plastic barrier behind the front seating area and a modified ventilation system to maintain an air pressure differential between the front and rear seating areas to reduce the risk of coronavirus transmission. Detroit has been especially hard hit by the outbreak, reporting 9,394 cases to date and 1,097 deaths through Monday, or 26% of all COVID-19 fatalities in Michigan.
The American Honda business of Honda Motor (NYSE: HMC) just reported its April auto sales, and they were ugly. Car sales were down an average of 55%, with similar results in both its Honda and Acura brands. Truck sales saw an average decline of 53%, at a 52% rate for the Honda brand, and 58% with Acura.
The head of the United Auto Workers union on Thursday said it was "too soon and too risky" to reopen auto plants and Michigan's economy in early May, citing insufficient scientific data and coronavirus testing to assure workplaces are safe. The warning from UAW President Rory Gamble on Thursday afternoon came as General Motors Co <GM.N> , Ford Motor Co <F.N> and Toyota Motor Corp <7203.T> took new steps toward reopening North American vehicle manufacturing operations in an environment where consumer demand is uncertain and worker safety paramount.
Factory closures, furloughs, pay cuts, and dividend and buyback suspension in the wake of coronavirus crisis have crippled the auto industry. Discouragingly, the situation is not likely to improve in the near future.
Japanese automaker Honda Motor Co <7267.T> said Wednesday it will extend a shutdown of its Mexican plants through April 30 and plans to furlough most U.S. salaried workers for two weeks as a result of the coronavirus pandemic. Honda began its suspension of operations in North America on March 23 and previously extended its shutdown in Canada and the United States through May 1. The company said the majority of its "salaried and support associates at Honda operations in the U.S. will be furloughed for a two-week period."
Honda Motor Co <7267.T> said it has remodeled 50 of its minivans to transport COVID-19 patients to hospitals and quarantine facilities in Japan, sealing off the rear section of the vehicles to keep drivers safe from infection. The Japanese automaker has placed an airtight divide between the driver and the rear passenger areas of the vans and tweaked their air conditioning systems to enable fresh air to enter through the front near the base of the windshield wipers, pass through to the rear passenger area through vents and exit through the back. The company said that the one-way ventilation system installed in its Odyssey and Step WGN minivan models ensures that air from the rear section does not enter the driver’s space, reducing the risk of infection.
Toyota Motor Corp <7203.T> said Wednesday it plans to reopen its North American auto plants on May 4, extending its current shutdown by two additional weeks. The Japanese automaker cited the ongoing COVID-19 pandemic and decline in vehicle demand to extend the halt of production at all of its automobile and components plants in Canada, Mexico and the United States. Toyota will not furlough its direct employees, but has asked its hourly plant employees to take two days out of the 10 day extension as paid time off or they can go without pay if they don’t have accrued leave.
General Motors (GM) & Honda (HMC) to jointly develop two new electric vehicles for the latter, featuring the proprietary Ultium battery technology of the former.