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This basket consists of stocks expected to benefit from self-driving cars.

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  • Could the Model Y Change Tesla’s Profit Game?
    Market Realist

    Could the Model Y Change Tesla’s Profit Game?

    This year, Tesla (TSLA) stock has fallen 21.3%, underperforming broader markets. Let's look at how Tesla's Model Y could turn things around.

  • Bloomberg

    Trump to Nominate Deputy Energy Secretary to Replace Rick Perry

    (Bloomberg) -- President Donald Trump said he will nominate Dan Brouillette to be his next energy secretary when Rick Perry leaves the job later this year.“Dan’s experience in the sector is unparalleled. A total professional, I have no doubt that Dan will do a great job!” Trump tweeted Friday.Brouillette has been serving as No. 2 to Perry, who led the Energy Department with its $36 billion budget and control of the nation’s nuclear arsenal and emergency crude oil stockpile. The White House arranged for Brouillette to meet with Trump on Friday after Perry gave the president a resignation letter. The deputy has been taking on increasingly high-profile roles for Perry, including sitting in for him at cabinet meetings. The White House session was described by people familiar with the matter who asked not to be named because it was private.Perry, 69, has been grooming Brouillette, 57, to succeed him for months while planning his own departure. In recent months, Brouillette has more frequently served as the public face of the Energy Department both on missions abroad and at U.S. events.Trump has elevated deputies at other agencies after the leaders departed. He made David Bernhardt acting secretary of the Interior after Ryan Zinke left the administration, then nominated him for the post. Trump used a similar approach with current Environmental Protection Agency Administrator Andrew Wheeler, who served as the second-ranking official under former chief Scott Pruitt.A Louisiana native, Brouillette worked at the Energy Department under former President George W. Bush as an assistant secretary for congressional and intergovernmental affairs.His vision for the Energy Department isn’t expected to veer from the one held by Perry, a vocal advocate of the nation’s oil and gas industry, who attempted -- so far unsuccessfully -- to subsidize unprofitable coal and nuclear plants in the name of national security and electric grid reliability.Brouillette has backed those efforts and said during a speech earlier this year that “fuel-secure units are retiring at an alarming rate,” a phenomenon that would “threaten our ability to recover from attacks and natural disasters,” if left unchecked.The nominee emerged as a key figure during internal administration debates last fall over whether to grant waivers for some countries from sanctions on Iran’s oil. Brouillette argued against the waivers, saying the administration should take a tougher stance against Iran, in a memo to the State Department.In addition to his past stint at the Energy Department under Bush, Brouillette has worked as staff director for the House Energy and Commerce Committee, where he played a role crafting major energy legislation. He also was a senior executive in the policy office of Ford Motor Co. and financial services provider United Services Automobile Association.To contact the reporters on this story: Jennifer Jacobs in Washington at jjacobs68@bloomberg.net;Ari Natter in Washington at anatter5@bloomberg.net;Jennifer A. Dlouhy in Washington at jdlouhy1@bloomberg.netTo contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net, Steve GeimannFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Can Ford Challenge Tesla with Its EV Charging Network?
    Market Realist

    Can Ford Challenge Tesla with Its EV Charging Network?

    Ford announced that it would offer North America’s largest electric vehicle public charging network, the FordPass Charging Network, to its EV customers.

  • Exclusive: Electric Hummer could be part of GM's move into EV trucks, SUVs - sources
    Reuters

    Exclusive: Electric Hummer could be part of GM's move into EV trucks, SUVs - sources

    WASHINGTON/DETROIT (Reuters) - General Motors Co plans to build a new family of premium electric pickup trucks and sport-utility vehicles at its Detroit-Hamtramck plant beginning in late 2021, possibly reviving the imposing Hummer brand on some of them, several people familiar with the plans said. The so-called BT1 electric truck/SUV program is the centerpiece of a planned $3 billion (2.3 billion pounds) investment in the Detroit-Hamtramck plant to make electric trucks and vans, and part of a broader $7.7 billion investment in GM's U.S. plants over the next four years, according to a proposed labor deal between the automaker and the United Auto Workers union. The investment would move the automaker into a part of the EV market that is largely untested and where GM has a higher likelihood of turning a profit, analysts said.

  • Lawmakers Slam Apple for ‘Censorship’ of Apps at China’s Behest
    Bloomberg

    Lawmakers Slam Apple for ‘Censorship’ of Apps at China’s Behest

    (Bloomberg) -- U.S. lawmakers from both parties slammed Apple Inc. and Chief Executive Officer Tim Cook on Friday for “censorship of apps” at the “behest of the Chinese government.”Senators Ted Cruz, Ron Wyden, Tom Cotton, Marco Rubio and Representatives Alexandria Ocasio-Cortez, Mike Gallagher and Tom Malinowski expressed concern about the removal of an app that let Hong Kong protesters track police movement in the city.“Apple’s decisions last week to accommodate the Chinese government by taking down HKmaps is deeply concerning,” they wrote in a letter to Cook, urging Apple to “reverse course, to demonstrate that Apple puts values above market access, and to stand with the brave men and women fighting for basic rights and dignity in Hong Kong.” Apple didn’t respond to a request for comment on Friday.Apple removed the HKmap.live app from the App Store in China and Hong Hong earlier this month, saying it violated local laws. The company also said it received “credible information” from Hong Kong authorities indicating the software was being used “maliciously” to attack police. The decision, and the reasoning, was questioned widely.Cook, in a recent memo to Apple employees, said that “national and international debates will outlive us all, and, while important, they do not govern the facts.” On Thursday, the CEO met with China’s State Administration for Market Regulation head Xiao Yaqing in Beijing to discuss consumer-rights protection, boosting investment and business development in the country, according to a statement from the Chinese regulator.The Cupertino, California-based company isn’t the only one referenced in Friday’s letter. The lawmakers mentioned recent headlines involving the National Basketball Association and Activision Blizzard Inc., a video game company that suspended a professional game player for supporting the Hong Kong protests.“Cases like these raise real concern about whether Apple and other large U.S. corporate entities will bow to growing Chinese demands rather than lose access to more than a billion Chinese consumers,” the lawmakers wrote.They also slammed Apple for removing other apps, including VPN apps that helped Chinese people get around the government’s online censorship. The letter said Apple has “censored” at least 2,200 apps in China, citing data from non-profit organization GreatFire. Apple says on its website that it removed 634 apps in the second half of last year globally due to legal violations.The letter implied that Apple made the removal decisions to maintain its huge business in China and appease the government. Greater China was Apple’s third-largest region by revenue last year, generating more than $50 billion in revenue.Apple is one of the rare tech companies that operates in China, with rivals like Google and Facebook Inc. hardly operational in the market. China’s importance to Apple means the company has to balance its own values with following local laws.In the past, the company has pulled the Skype and New York Times apps from its App Store in China. More recently, it removed a Taiwanese flag emoji for users in Hong Kong and Macau and was criticized for sending some browsing data to China’s Tencent Holdings Ltd. as part of a privacy feature.To contact the reporters on this story: Mark Gurman in San Francisco at mgurman1@bloomberg.net;Ben Brody in Washington, D.C. at btenerellabr@bloomberg.netTo contact the editors responsible for this story: Tom Giles at tgiles5@bloomberg.net, Alistair Barr, Robin AjelloFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

  • Pixel 4: Google’s Latest Smartphone Disqualified in India
    Market Realist

    Pixel 4: Google’s Latest Smartphone Disqualified in India

    Google’s latest smartphone, the Pixel 4, won't be available for sale in India, the world’s second-largest smartphone market.

  • Auto Stock Roundup: Ford Q3 China Sales Dip, Tesla Q3 UK Sales Hit a Record & More
    Zacks

    Auto Stock Roundup: Ford Q3 China Sales Dip, Tesla Q3 UK Sales Hit a Record & More

    While Ford's (F) sales in China fall 30.3% year over year in Q3, Tesla takes the U.K. market by storm with record deliveries of 6,244 vehicles.

  • Amazon Needs a Leash
    Bloomberg

    Amazon Needs a Leash

    (Bloomberg Opinion) -- The New Yorker and the Atlantic have never been known for their business coverage, so when both magazines published long articles about Amazon.com Inc. in their current issues it signaled that something is in the air. That something is antitrust.More precisely, what’s in the air is the question of what the government should do to rein in the tremendous power of the big four tech companies: Facebook Inc., Alphabet Inc.’s Google, Apple Inc. and Amazon.Once the province of think tanks and law reviews, this topic has become such a public concern that 48 of the 50 state attorneys general are conducting antitrust investigations, presidential hopefuls are calling for tech giants to be broken up, and general interest magazines like, well, the New Yorker and the Atlantic are asking whether the companies abuse their market power. In this particular case, the magazines are asking it about Amazon.The Atlantic article is by Franklin Foer, who has long raised concerns about Big Tech. Five years ago, for instance, he wrote a cover story for the New Republic titled “Amazon Must Be Stopped.” It focused on Amazon’s dominance over the book business.This time around, he is writing about the unbridled ambition of Amazon’s founder and chief executive officer Jeff Bezos. (The new article is “Jeff Bezos’s Master Plan.”) “Bezos’s ventures are by now so large and varied that it is difficult to truly comprehend the nature of his empire, much less the end point of his ambitions,” Foer writes. He then goes through a list. Bezos wants to conquer space with his company Blue Origin. Bezos’s ownership of the Washington Post makes him a significant media and political figure. Bezos’s brainchild, Amazon, “is the most awe-inspiring creation in the history of American business.” And so on.He also points out that while critics fear Amazon’s monopoly power, the company is loved by consumers. “A 2018 poll sponsored by Georgetown University and the Knight Foundation found that Amazon engendered greater confidence than virtually any other American institution,” he writes. I have no doubt that this is true; Amazon’s obsession with customer service instills tremendous loyalty among consumers. It’s no accident that over 100 million people now pay the company $119 a year to be Amazon Prime members. That loyalty is also one reason taking antitrust actions against Amazon would be much more difficult than going after Facebook or Google. I’ll get to some other reasons shortly.Charles Duhigg’s New Yorker article “Is Amazon Unstoppable?” is both smarter about Amazon and more pointed about its power. Duhigg captures its relentless culture, comparing it to a flywheel that never stops. He described Bezos’s efforts to ensure that Amazon never loses the feel of a scrappy startup. The phrase that came to mind as I was reading Duhigg’s article was Andy Grove’s famous dictum: “Only the paranoid survive.”Duhigg is also interested in what Amazon’s critics have to say. Amazon paid no federal taxes last year. Amazon's work culture can be difficult for women who have children. Amazon’s warehouse workers are sometimes fired after being injured on the job. Amazon doesn't effectively police the sale of counterfeit goods on its site. (In the article, Amazon’s representatives deny these allegations.)Then there’s the fact that Amazon both serves as a platform for companies wanting to sell things and sells things itself. In other words, it competes with the same companies it enables. According to Duhigg, Amazon has been known to track items that do well, and then make its own version of the same item — which it then sells at a discounted price. (Amazon denies this, too.) Margrethe Vestager, the European Union’s commissioner for competition, told Duhigg that the practice “deserves much more scrutiny.”The story’s killer anecdote, at least as it concerns antitrust, is about Birkenstock USA LP’s experience with Amazon. Although Birkenstock sold millions of dollars of shoes using the Amazon platform, it was constantly hearing customer complaints that the shoes were defective. Why? Because, according to Birkenstock, Amazon allowed counterfeits to be sold on the site. Not only would Amazon not take down the counterfeit goods, but it also wouldn’t even tell Birkenstock who was selling them.Amazon also had stocked a year’s worth of Birkenstock inventory, which terrified the company. “What if Amazon decides to start selling the shoes for 99 cents, or to give them away with Prime membership, or do a buy-one-get-one-free,” wondered Birkenstock’s chief executive officer, David Kahan. “We were powerless.”Kahan’s complaints went nowhere. So he pulled Birkenstocks off Amazon. What did Amazon do? It solicited Birkenstock retailers, offering to buy shoes directly from them. Today, if you search for Birkenstocks on Amazon you’ll be deluged with choices even though the company itself refuses to do business with Amazon. I found a pair of Arizona oiled leather sandals — listed on Birkenstock's website for $135 — marked down to $60 on Amazon. Is it the real thing, or is it a counterfeit?The hard question: What do you do about this kind of behavior? On one extreme is the Democratic presidential candidate Senator Elizabeth Warren, who believes the most appropriate solution is to break up Amazon. At the other end of the spectrum, there are still plenty of antitrust economists who believe that if a $135 sandal is being sold for $60, that’s good for consumers. They argue that the government should just stay out of the way.I’m a proponent of breaking up Facebook, mainly because I believe if you force it to disgorge two of its prized platforms, Instagram and WhatsApp, you’ll instantly create serious competitors. That could help raise the bar on privacy, data usage and other concerns. But I’m not sure that would work with Amazon.For instance, if Amazon had to separate its highly profitable cloud service, Amazon Web Services, from its retail business the power dynamic between Amazon and the companies that use its platform would remain.What’s more, it’s harder to make a classic antitrust case against Amazon than it is against Facebook and Google. According to the research firm EMarketer Inc., Amazon is expected to account for 37.7% of all online commerce in 2019. By contrast, Google controls 89% of the search market.Still, for too many retailers, Amazon has the power to control their destiny, for good or ill. As the antitrust activist Lina Khan wrote in her now-famous 2017 article in the Yale Law Journal: “History suggests that allowing a single actor to set the terms of the marketplace, largely unchecked, can pose serious hazards.” I take that assessment to mean that government intervention at Amazon is needed.To my mind, the simplest and most sensible solution is from the economist Hal Singer: Don’t allow platform companies to favor their own products over competitors’ products. Singer calls this a “nondiscrimination regime,” and models it after the Cable Television Consumer Protection and Competition Act, which prevents cable distributors from favoring their own content over content from competitors. In that scenario, a company that felt it was being discriminated against by Amazon could bring a complaint to federal regulators just as cable stations can do now. This regime has worked well for the TV industry. It could work for Amazon, too.Secondly, the government should hold Amazon accountable for counterfeits. Counterfeiting is against the law, and although Amazon told Duhigg that it spends “hundreds of millions of dollars” on anti-counterfeiting efforts it’s no secret that many deceptively labeled goods are still sold on the site. (See, for instance, this recent Wall Street Journal story.) Companies like Birkenstock have a right to expect that a platform selling its products will rigorously police counterfeits — and will identify counterfeiters so manufacturers of authentic goods can take legal action.These are solvable problems. They don’t require extreme measures. What they do require is a government with the will to transform Amazon’s platform from what it is now, a vehicle that squelches competition, to one that lets competition flower.(Corrects paragraph eight to accurately describe the year in which Amazon paid no federal taxes and to more accurately describe the experiences of women with children who work for the company. Also changes language in paragraph eight to more accurately describe how effectively Amazon combats the sale of counterfeit goods on its site. Also corrects paragraphs 12 and 13 to accurately reflect pricing disparities between sandals sold on Birkenstock's website and those sold on Amazon.)To contact the author of this story: Joe Nocera at jnocera3@bloomberg.netTo contact the editor responsible for this story: Timothy L. O'Brien at tobrien46@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Joe Nocera is a Bloomberg Opinion columnist covering business. He has written business columns for Esquire, GQ and the New York Times, and is the former editorial director of Fortune. His latest project is the Bloomberg-Wondery podcast "The Shrink Next Door."For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.

  • Is Ford's Charging Network a Headache for Tesla?
    Zacks

    Is Ford's Charging Network a Headache for Tesla?

    Ford's charging network will help competition heat up, but there can be positive kickbacks.

  • What's in the Offing for Ford (F) This Earnings Season?
    Zacks

    What's in the Offing for Ford (F) This Earnings Season?

    While higher revenues in the North American market are likely to have benefited Ford (F), lower vehicle deliveries in China, Europe and Asia Pacific regions might have hampered profits.

  • Zacks Value Trader Highlights: MasTec, Macy's, Kansas City Southern, Allstate and Tesla
    Zacks

    Zacks Value Trader Highlights: MasTec, Macy's, Kansas City Southern, Allstate and Tesla

    Zacks Value Trader Highlights: MasTec, Macy's, Kansas City Southern, Allstate and Tesla

  • Alphabet, ArcBest, Workday, ServiceNow and Splunk highlighted as Zacks Bull and Bear of the Day
    Zacks

    Alphabet, ArcBest, Workday, ServiceNow and Splunk highlighted as Zacks Bull and Bear of the Day

    Alphabet, ArcBest, Workday, ServiceNow and Splunk highlighted as Zacks Bull and Bear of the Day

  • Tesla Gets Clearance to Begin Production in China Gigafactory
    Zacks

    Tesla Gets Clearance to Begin Production in China Gigafactory

    Tesla (TSLA) intends to produce at least 1000 Model 3 units per week in the Gigafactory to strengthen sales in China.

  • Market Realist

    If This Waymo Plan Works, Alphabet’s Costs Could Start Falling

    Alphabet’s Waymo One plans to start using driverless cars for its autonomous taxis. The service is available to a small group of customers in Phoenix.

  • There Will Be No More Facebook Revolutions
    Bloomberg

    There Will Be No More Facebook Revolutions

    (Bloomberg Opinion) -- “Twitter revolution,” “Facebook revolution” — these terms became widespread during the Arab Spring rebellions at the beginning of this decade. They’re outdated now: For today's protesters in Hong Kong and Barcelona, or for Extinction Rebellion activists in capitals around the world, the social networks and even messenger applications run by big U.S. corporations are becoming a secondary tool, and one not used for organizational purposes.After protesters in Egypt forced President Hosni Mubarak to resign in February 2011, one of the revolution’s public faces, Google executive Wael Ghonim, went on CNN to be interviewed by anchors Anderson Cooper and Wolf Blitzer. When Blitzer asked him what was going to happen next, the following exchange ensued:Ghonim: Ask Facebook.Blitzer: Ask what?Ghonim: Facebook.Cooper: Facebook.Blitzer: Facebook. You’re giving Facebook a lot of credit for this?Ghonim: Yes, for sure. I want to meet Mark Zuckerberg one day and thank him, actually. This revolution started online. This revolution started on Facebook.That was so 2011. If there’s any one app today’s protesters would want to credit, it’s Telegram. But not even this itinerant messenger, whose team was based in St. Petersburg, Berlin, London and Singapore before ending up in Dubai, plays the same kind of outsize role that Facebook and Twitter took on in previous protests, up to and including Hong Kong’s Umbrella Movement” of 2014. With its powerful group messaging functionality and “channel” feature which allows users to broadcast information, Telegram is the central media platform for the Hong Kong protesters of today, who are now pushing for greater democracy for the former British colony. It’s also the go-to tool for pro-independence Catalans who have taken to the streets to protest the long prison sentences for leaders of the Spanish region’s doomed 2017 secession bid. There, the secretive Democratic Tsunami group uses Telegram to communicate with its 150,000 followers. It also uses a Telegram bot to collect data for an app it created to map protest activities and street clashes. For its part, Extinction Rebellion has been moving from Facebook-owned WhatsApp to Telegram because it allows bigger group chats, and because it has a voting tool that allows independent-minded rebels to decide what they want to do. (This tool is also used in Hong Kong).Signal, the encrypted messenger, and Mattermost, an open-source alternative to the enterprise messenger Slack, also are popular among activists.Direct file transfers, encrypted messengers and specially created apps have become essential for spreading all kinds of material that might land its distributors in trouble — such as the fake boarding passes Democratic Tsunami sent out so protesters could get into the Barcelona airport on Oct. 14, causing more than 100 flights to be canceled.Of course, today’s activists still use social media platforms run by big U.S. corporations. But when they do it’s mainly for outward communication such as with the media, not with people actively involved in the protests. Since the Arab Spring, governments have mastered use of the big commercial social media networks themselves. Since the Hong Kong protests began, both Facebook and Twitter have complained about China’s attempts to use them for disinformation and counterpropaganda. Besides, many protesters believe their anonymity isn’t well protected on the social networks, Malek Dudakov of the Moscow-based think tank Center for the Study of New Communications wrote in a recent report about the use of the technology by the Hong Kong protest movement. Telegram, run by a nonprofit founded by Russian libertarian Pavel Durov, has a reputation for resisting government attempts at censorship and infiltration. Russia has attempted to block the messenger for refusing to hand over encryption keys to domestic intelligence, but Telegram has fought back and is still accessible in most of Russia. Mainland China has had more success in cutting off access to it. But even on Telegram, the risk of losing one’s anonymity is a potential problem. One protest group moderator in Hong Kong was arrested in June. Durov has accused China of trying to take his service down in Hong Kong with distributed denial of service attacks. Those efforts contrast with concerns that big U.S. companies are more likely to cooperate with the authorities.Earlier this month, Apple Inc. approved a smartphone map app that Hong Kong protesters have been using for distribution in its App Store after an initial ban. But then it swiftly took HKmap.live down again. Apple Chief Executive Officer Tim Cook explained that the Hong Kong cybersecurity authority had told the company that the app was being used by criminals to “target individual officers for violence and to victimize individuals and property where no police are present.” This episode prompted the Democratic Tsunami in Catalonia to release its own app for Android only — and not through the Google Play Store, in which most Android users get their apps.Even though its services are blocked in mainland China, Google has also behaved in a way some protesters, and even some of its employees, find suspicious. Citing an internal rule against the monetization of current events, the Play Store banned a game called “The Revolution of Our Times” that allowed players to act out the role of Hong Kong protesters. The game’s developers had promised to give 80% of their proceeds to charity.Big Tech’s role, even if unwitting, in unrest has always looked like an aberration. Where the profit motive is involved, cooperating with governments makes more sense than facilitating those who fight them. Now, the dust is settling on the tech revolution, and real-world revolutions need non-commercial tech tools. So protesters either design their own or fall back on open-source apps or those developed by nonprofits. Facebook and Twitter are where propaganda battles rage and insults fly, not where action is coordinated — and that’s a natural consequence of their evolution as big businesses that attract way too much government attention.So, if you’re wondering what comes next for all the modern-day protest movements, don’t ask Facebook.To contact the author of this story: Leonid Bershidsky at lbershidsky@bloomberg.netTo contact the editor responsible for this story: Melissa Pozsgay at mpozsgay@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Leonid Bershidsky is Bloomberg Opinion's Europe columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.

  • Will Tesla Achieve Musk’s Vision of a Profitable Q4?
    Market Realist

    Will Tesla Achieve Musk’s Vision of a Profitable Q4?

    Tesla (TSLA) stock is having a strong run this month. After a weak start, the stock has closed with gains for nine consecutive trading days.

  • Tesla's Nuerburgring run revs up debate over speed records
    Reuters

    Tesla's Nuerburgring run revs up debate over speed records

    Tesla Inc's attempts to humble Porsche with a new lap record on Germany's legendary Nordschleife racetrack have reignited a controversy about the value of lap times, as the circuit steps in to quash claims of cheating. Porsche and U.S.-based Tesla are battling to establish supremacy in lap times for four-door electric sportscars, but comparisons are not exact, as conditions, ranging from car modifications to tyre types, vary with each test. "We want to have circumstances that can be understood and replicated," said Nuerburgring spokesman Alexander Gerhard, adding that the racing circuit operator had moved to tighten rules by which a car maker can claim a certified lap time.

  • Bull of the Day: Alphabet (GOOG)
    Zacks

    Bull of the Day: Alphabet (GOOG)

    Bull of the Day: Alphabet (GOOG)

  • What Happens to a Startup With a #MeToo Scandal and No HR Department
    Bloomberg

    What Happens to a Startup With a #MeToo Scandal and No HR Department

    (Bloomberg) -- The MeToo movement has helped uncover the many ways men abuse positions of power, as well as the corporate fixers and financial settlements that enable such behavior. But what happens at a company just getting its start, with a few dozen employees, a board consisting of three men and no HR department?For Priyanka Wali, the experience was disillusioning. Soon after going to work for a two-year-old health care startup in San Francisco, she said her boss touched her knee and later commented in a meeting that he “wouldn’t mind” if she were his girlfriend. Wali, a contract physician, didn’t report the alleged behavior when it occurred in 2016, she said, because the company, Virta Health Corp., didn’t have a human resources department at the time.The situation festered until this year, when she and a colleague filed formal complaints with the company against the same manager. Virta, which now has 165 employees and a three-person HR team, commissioned an investigation in March and found their claims of harassment to be credible, according to a copy of the report reviewed by Bloomberg. The initial determination was that Wali would keep reporting to her boss because there wasn’t another manager available. That sparked an uproar in the office, and she was eventually reassigned to a new boss. But by then, damage had been done, former employees said. Their faith in management had been shaken, and several people said they sought jobs elsewhere as a result.“It is already hard enough to come forward after experiencing harassment,” Wali wrote in an email to Bloomberg. “I came forward to HR, and I ended up experiencing more stress as a result and had to eventually leave my job for my own psychological wellness.”Sami Inkinen, Virta’s chief executive officer, said in an emailed statement that his company “immediately took the complaint very seriously, worked hard to get the process right but should have handled parts of it better.” The company held an all-hands meeting in May, he said, “to openly acknowledge where we fell short, to explain what we did right and establish the highest possible bar for handling situations like this in the future.”A Virta spokesman said the initial decision to have Wali continue reporting to her manager was “a mistake” and that the company has taken steps to improve. The alleged harasser, Michael Scahill, no longer works at Virta. “I was very saddened and sorry to learn, years after the events, that some of my actions offended colleagues whom I respect greatly,” Scahill wrote in a email. “I never wanted to upset anyone and have apologized to those involved.”The allegations, whispered about within the office over the last couple years, caught the attention of the San Francisco Business Times in August, when the newspaper reported on a company investigation into claims by two unnamed women. One of the women, Wali, spoke to Bloomberg, as did three other employees who were there at the time. Their accounts, along with the investigator’s statement, shed new light on a dynamic that routinely goes unreported at very young companies and illustrates how workers can feel helpless when a startup isn’t equipped to field their complaints. California law extends sexual harassment protections to independent contractors, but neither woman has filed a lawsuit.“I came forward to HR, and I ended up experiencing more stress as a result.”For all the horror stories about established corporate policies and HR departments failing to protect employees or worse, the alternative can be similarly destructive. Many entrepreneurs wait years before establishing HR departments, said Elaine Varelas, a managing partner at Keystone Partners, an HR consulting and executive coaching firm. Startups tend to prioritize other specialties, such as finance or legal, as a cost-saving decision that can leave employees without recourse and allow culture problems to linger, Varelas said. “They say it’s for money, or they’ll say they have an employment attorney,” she said, “but it’s not the same.”Good HR policies can be undervalued at startups, Varelas said. Companies rarely advertise their response to sexual misconduct claims, despite how commonplace the issue is today. “Women aren’t going to work at a company that ‘deals with sexual harassment well,’” she said. “It’s not an enticing ad.”Inkinen started Virta in 2014 with two nutrition researchers and a noble mission: reverse diabetes in 100 million people. The Finland-born entrepreneur, a competitive cyclist and triathlete who once rowed across the Pacific Ocean with his wife, had little experience in health care but plenty at big companies. He worked at McKinsey & Co. and Microsoft Corp. He then helped start and run Trulia, a real estate search engine, until Zillow Group Inc. bought the company in 2014. For Virta, Inkinen would go on to raise more than $80 million from investors, including Venrock and Playground Global, an incubator founded by former Google executive Andy Rubin.Wali, a doctor specializing in internal medicine and obesity treatments, was working with patients and teaching medical students in the San Francisco Bay Area when Virta was starting up. She joined the company in late 2016 as a contractor, with the hope of soon getting promoted to full time. That plan quickly got complicated. In her first week on the job, Wali’s boss put his hand on her knee during a one-on-one meeting, according to the legal investigator’s report. Although it’s not covered in the report, Wali said the touching happened more than once. He made the comment about not minding if she were his girlfriend on a video conference call with colleagues present, according to Wali and the report. (Wali declined to name the man, but the report identifies him as Scahill.)In Virta’s early days, the company’s chief of staff handled what typically would be considered HR responsibilities. Virta hired a head of HR in October 2016, but she lasted less than two months—departing just two days before the alleged touching began, Wali said. A new chief of staff took on HR responsibilities. But Wali said it wasn’t clear to her who was in charge of HR at that time and that she saw no options for recourse. “I was worried that if I spoke up to someone in upper management about my boss’s behavior, it would jeopardize my chance of being hired as a full-time physician,” Wali wrote. “I kept quiet.” About a week later, Scahill invited her to join him at a medical society gala that he had initially planned to bring his girlfriend to, she said. His reasoning, she said, was that they could network together. She declined and purchased her own ticket.Around the same time, according to the investigator’s report, Scahill made repeated comments to another female contractor at Virta. He complimented her appearance and told her once that she was “gorgeous,” the woman told the investigator.Workers began making efforts to communicate the alleged behavior to management in 2017. The second woman contributed feedback for Scahill’s performance review that year describing him as “too flirtatious in the workplace,” though his supervisors didn’t read the responses before passing it on to him, the company spokesman said. In a survey the next year, a male employee wrote that Scahill “has made several disrespectful comments about women.” The feedback was reviewed by a supervisor, who discussed it with Scahill, the spokesman said.Like in other offices across the U.S., management at Virta were closely monitoring the fallout from the MeToo movement. The company put out its first employee handbook in April 2018, outlining a policy against harassment in the workplace, and instated a website for employees to share feedback and complaints anonymously. However, Virta still lacked a head of HR and reopened a search for the role in August that year. The general counsel was overseeing personnel matters, alongside legal functions, finance and other areas. At a staff meeting in October 2018, a worker asked about a post on the employer review site Glassdoor that referenced sexual harassment at Virta. Inkinen, the CEO, responded that the fastest way to get fired at Virta was to harass someone, according to a former employee who attended the meeting.Virta hired a new head of HR in January. A couple months later, Wali discovered she wasn’t the only one with concerns about Scahill. Colleagues openly discussed his behavior at a happy hour event in the office that Wali attended. Wali filed a complaint with the new HR boss, as did the second woman.In response, Virta hired an attorney from an employment law firm to investigate. Over the course of a week, the lawyer interviewed the two women, Scahill and six other employees. The resulting report described allegations of inappropriate comments and touching as credible and said he had stopped the behavior after early or mid-2017.Meanwhile, HR was staffing up. An HR representative, by then one of three people in the department, met with Wali in April and recounted the investigator’s findings, Wali said. She also learned in the meeting that she would still need to have the same boss, she said. “I asked the HR manager how on earth I could be asked to continue reporting to someone who had touched me inappropriately and made comments to me that made me feel uncomfortable?” Wali wrote in an email to Bloomberg.Distressed, Wali took time off to process the news. Virta management acknowledges it didn’t share the results of the investigation with staff, but word spread quickly of the report’s conclusions, former employees said. Some cited an inconsistency with what Inkinen had said the year before about taking a hard line on sexual harassment, one of the people said. Several asked their managers why Wali wasn’t offered a different boss.Four days after Wali was told she’d keep the same boss, Virta contacted her to schedule a call about the situation. She heard from another manager four days after that saying she could now report to him. She asked him to elaborate on the decision-making process and didn’t get a clear answer, she said. “At this point, I became very uncomfortable with how the company handled harassment in the workplace—specifically with what I felt was a lack of accountability and transparency with these decisions,” Wali wrote.Wali and the second woman quit on the same day in early May. Soon after, Virta executives asked for Scahill’s resignation. The following Monday, Inkinen held another staff meeting, this time to apologize. He said the company had made a misstep in not taking into account the emotional safety of its workers, according to a former employee who attended. The message didn’t stop several other Virta employees from leaving and citing the handling of the complaint as an impetus, said two ex-employees.One person who quit over the issue said they lost faith that executives took the welfare of their workers seriously. “No one reports stuff for fun,” the former employee said. “I think they underestimated the impact this would have on the team.”To contact the author of this story: Ellen Huet in San Francisco at ehuet4@bloomberg.netTo contact the editor responsible for this story: Mark Milian at mmilian@bloomberg.net, Anne VanderMeyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

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