including the vice president overseeing body engineering and its head of supply chain, have left the EV startup in recent months, as the company exits a year in which it fell short of its production targets.
The departures, confirmed by a Rivian spokeswoman, are the latest developments in what has been a challenging period for Rivian, which has been rolling out its first all-electric models but last year missed a critical milestone of manufacturing 25,000 vehicles. The company said it was off its goal by about 700 vehicles in part because of difficulty getting parts.
Rivian’s stock has also tumbled since its blockbuster initial public offering in November 2021, down roughly 79% through Tuesday’s close.
The executives who have left were some of Rivian’s longer-tenured employees. Among them is Randy Frank, vice president of body and interior engineering, and Steve Gawronski, the vice president in charge of parts purchasing. Both had departed around the beginning of this year.
Mr. Frank joined Rivian in 2019 from
Ford Motor Co.
Mr. Gawronski joined in 2018 from the autonomous vehicle startup Zoox.
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Another early employee, Patrick Hunt, a senior director in the strategy team, left the company late last year. Mr. Hunt joined Rivian in 2015.
Rivian’s general counsel, Neil Sitron, departed in September after 4½ years with the company, which was founded in 2009.
The Rivian spokeswoman said the company wants to ensure the startup has the talent and staff it needs to ramp up production. The company declined to comment on the individual circumstances of the departures. Efforts to reach the former employees weren’t immediately successful.
“We continue to attract world class talent to our company as our business needs change,” she said.
The departures mark the latest shake-up at the top of Rivian, which has brought in new executives to oversee the company’s manufacturing operations. The company’s first full year of factory production was marred by supply-chain troubles and difficulties getting the assembly line to run at full speed.
Tim Fallon, former head of
Nissan Motor Co.
’s factory in Canton, Miss., was hired in early 2022 to run Rivian’s sole factory in Normal, Ill.
In June, Rivian hired Frank Klein as chief operating officer, from contract manufacturer
Magna Steyr.
In a November email to employees reviewed by the Journal, Mr. Klein wrote that with Mr. Gawronski’s exit, the company was taking the opportunity to make some organizational changes to ensure it can support the increased complexity that the group will handle in coming years.
Mr. Klein added Rivian was reorganizing its supply-chain management, putting one vice president in charge of the supply chain and logistics, and another in charge of parts procurement.
He also announced that Rivian had hired Andreas Reutter from tool maker
Stanley Black & Decker Inc.
to oversee Rivian’s supply-chain logistics.
The changes at the top of Rivian come as it attempts to transform from an upstart looking to raise capital to a mass manufacturer with ambitions to become one of the world’s largest auto makers.
Rivian is under pressure to prove it can build its electric trucks at scale without having ramped up production before, as competition heats up from legacy auto makers. WSJ toured Rivian’s and Ford’s EV factories to see how they are pushing to meet demand. Illustration: Adam Falk/The Wall Street Journal
Its first all-electric models, the R1T pickup truck and R1S sport-utility vehicle, are relatively new. The company has only been building cars at its Illinois factory since late 2021. Before then, it had never built or sold a single vehicle for retail.
As part of its expansion, Rivian went on a hiring spree, growing rapidly from about 1,200 workers in 2019 to around 14,000 employees by the summer of last year and has only recently begun creating positions that exist at many companies.
In April, Anisa Kamadoli Costa was hired as chief sustainability officer from jewelry maker Tiffany Inc. In October, Rivian hired a former Capital One Financial Corp. executive, Diane Lye, as its first chief information officer.
As Rivian has struggled to increase factory output, it has come under pressure to trim spending. Last summer, the company laid off around 6% of its workforce and cut spending on many of its programs.
The company became focused on bringing production of its current set of vehicles up to speed. It also makes an electric delivery van that it sells to Amazon.com Inc.
In an example of the young car maker’s shifting priorities, Rivian suspended negotiations with Mercedes-Benz AG over a proposed van partnership in Europe, which had been an expansion target for Chief Executive RJ Scaringe. Rivian said the decision came after re-evaluating its opportunities for growth.
The company reported a net loss of $5 billion for the first nine months of 2022, and its cash pile fell to $13.8 billion at the end of September, down from $15.46 billion in June. Rivian is scheduled to report its full-year results on Feb. 28.
Write to Sean McLain at sean.mclain@wsj.com and Nora Eckert at nora.eckert@wsj.com
said it fired three of the founder’s top deputies.
Gary Wang, an FTX co-founder and its chief technology officer; FTX engineering director Nishad Singh; and Caroline Ellison, who ran Mr. Bankman-Fried’s trading arm, Alameda Research, were terminated from those roles after FTX tapped
John J. Ray
to oversee the companies’ bankruptcy, an FTX spokeswoman said late Friday.
Mr. Bankman-Fried resigned on Nov. 11, when FTX filed for bankruptcy. He was replaced by Mr. Ray, a veteran restructuring executive who once oversaw the liquidation of Enron Corp.
FTX and Alameda sought protection from creditors after executives at both businesses revealed that FTX had lent billions of dollars worth of customer assets to Alameda to plug a funding gap, The Wall Street Journal previously reported. In a Thursday court filing, Mr. Ray highlighted numerous failings, including “the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals.”
On a Nov. 9 video call with Alameda employees, Ms. Ellison said that she, along with Messrs. Bankman-Fried, Wang and Singh, were aware of the decision to send customer money to the trading firm, the Journal previously reported.
The four executives also comprised the board of what they called the Future Fund, a philanthropic arm charged with making grants to nonprofits and investments in “socially-impactful companies.”
Messrs. Bankman-Fried, Wang and Singh all owned stakes in at least some of the FTX companies, according to Mr. Ray’s court filing.
“Mr. Bankman-Fried ultimately agreed to resign, resulting in my appointment as the debtors’ CEO,” Mr. Ray wrote in the filing. “I was delegated all corporate powers and authority under applicable law, including the power to appoint independent directors and commence these Chapter 11 cases on an emergency basis.”
Write to Justin Baer at justin.baer@wsj.com and Hannah Miao at hannah.miao@wsj.com
Beleaguered cryptocurrency platform FTX filed for bankruptcy protection Friday, and Chief Executive
Sam Bankman-Fried
resigned.
FTX and a bevy of affiliates said they had more than 100,000 creditors and tens of billions of dollars in assets and liabilities. It is the largest crypto-related bankruptcy ever, and a demise remarkable for its swiftness as well as its size.
Just a week ago, FTX was an industry titan, and Mr. Bankman-Fried its smiling public face. In January, FTX raised money from Silicon Valley’s most sophisticated investors, at a valuation of $32 billion. A few weeks ago, Mr. Bankman-Fried was publicly musing about raising more, to get even bigger.
That is all gone. The bankruptcy will likely wipe out billions of equity value, leaving investors including Sequoia Capital and Thoma Bravo with stiff losses. It will maroon the crypto and cash deposits belonging to a legion of customers. FTX faces investigations or asset freezes from regulators and prosecutors around the world.
It has also rattled the crypto world. Crypto lender BlockFi, which had obtained a financial lifeline from FTX in July—one of several companies FTX had rescued earlier in the year—paused withdrawals Thursday evening.
Among the affiliates filing for bankruptcy protection is FTX US, a smaller unit that operated in the U.S. Most of FTX’s business was offshore. FTX and its affiliates filed in federal bankruptcy court in Delaware, where the U.S. unit is registered.
Thursday morning, Mr. Bankman-Fried said the troubles at FTX were confined to its international operations. He tweeted that FTX US “was not financially impacted” and that “every user could fully withdraw.” Later that day, FTX US said it might stop trading. On Friday, FTX US filed for bankruptcy along with the rest of FTX.
Bitcoin slipped after the announcement to trade near $16,500.
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At issue in the bankruptcy proceedings and the investigations is to determine what happened to the billions that FTX raised, that its customers deposited, and that it earned from operating what appeared—for a time—to be a successful cryptocurrency exchange.
FTX in 2021 also paid $250 million—a quarter of its revenue that year—to a “related party” for software royalties, according to documents viewed by The Wall Street Journal.
Mr. Bankman-Fried wrote on Twitter roughly an hour after the bankruptcy announcement that he was “shocked to see things unravel the way they did earlier this week.”
FTX’s troubles began last weekend, after rival exchange Binance said it would sell its holdings of an FTX equity-like token—spooked by a CoinDesk report showed the depth of the relationship between FTX and Alameda.
John J. Ray
III has been named the new CEO of FTX Group, the company said. The bankruptcy filing includes FTX Trading Ltd., the company presiding over the global trading website FTX.com, and Alameda Research, a trading firm founded by Mr. Bankman-Fried, in addition to FTX US.
Mr. Ray was chairman of Enron Corp.’s successor company, Enron Creditors Recovery Corp., and oversaw the energy-trading company’s liquidation after it filed for bankruptcy in late 2001. The recovery rate for Enron creditors as of 2008 was about 52 cents on the dollar, the company said at the time. Mr. Ray’s successes included securing a $1.7 billion settlement with
Citigroup
in 2008. He had accused the bank of helping Enron mislead investors.
Other noteworthy bankruptcy cases in which Mr. Ray served in similar roles include Nortel Networks Inc., Fruit of the Loom and
Overseas Shipholding Group Inc.
In the petition, Mr. Bankman-Fried said that
Stephen Neal
would be appointed as the chairman of the board of FTX Group if he is willing to serve. He also said that he is being advised by the law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP.
FTX is the latest in a string of crypto companies seeking bankruptcy protection this year.
Photo:
Leon Neal/Getty Images
Bankruptcy means that it could be a long time before retail traders and others owed their funds are able to potentially recover any of them, if ever. Creditors to Mt. Gox, the Japanese crypto exchange that failed following a 2014 hack, are still waiting for their funds almost a decade later.
The collapse in digital-currency prices earlier this year triggered a rash of crypto-related bankruptcy filings, including Celsius Network LLC,
Voyager Digital Ltd.
and Three Arrows Capital.
Crypto investors may be confronted with an uphill battle to get their crypto deposits back in bankruptcy proceedings because their investments are likely to be treated as unsecured claims without collateral rights.
FTX’s bankruptcy also calls into question the fate of Voyager Digital. In September, the firm won the auction to buy the bankrupt lender’s assets with a purchase price of about $50 million, The Wall Street Journal has reported.
Voyager said Friday that the firm has reopened the bidding process for the company and is in active discussions with potential buyers. Voyager said it didn’t transfer any assets to FTX US, which previously submitted a $5 million good-faith deposit as part of the auction process. The funds are held in escrow, according to Voyager.
Voyager also recalled loans from Alameda Research for 6,500 bitcoin and 50,000 ether. The company currently has no loans outstanding with any borrower, it said. However, Voyager had about $3 million worth of cryptocurrencies stuck on FTX at the time of its bankruptcy filing.
—Jonathan Weil
contributed to this article.
Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Alexander Gladstone at alexander.gladstone@wsj.com
Corrections & Amplifications Sam Bankman-Fried said he is being advised by the law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP. An earlier version of this article incorrectly said FTX was being advised by the law firm. (Corrected on Nov. 11)
is leaving the department-store chain early next month to join
Levi Strauss
LEVI -2.12%
& Co. with plans to have her take over as the jeans maker’s CEO.
At Kohl’s, Ms. Gass has been under attack from activist investors for sales declines and a steep drop in the company’s stock price. In September, activist investor Ancora Holdings Inc., urged the company to replace Ms. Gass and its chairman. Kohl’s shares, down nearly 40% on the year, jumped 8% in early Tuesday trading.
Ms. Gass will leave Kohl’s Dec. 2 and join Levi Jan. 2, where she will serve as president with oversight of Levi’s brand and global digital and commercial operations. The 54-year-old will succeed Levi’s CEO
Chip Bergh
within 18 months, the company said. Mr. Bergh, who is 65 years old, has run Levi Strauss since 2011.
Kohl’s appointed
Tom Kingsbury
to serve as interim CEO until a permanent successor is named. Mr. Kingsbury is a former
Burlington Stores Inc.
CEO who joined Kohl’s board in 2021 as part of a settlement with activists. In a statement, Ancora said it was the right time to find new leadership and it was pleased that Mr. Kingsbury was the interim CEO.
Kohl’s also released preliminary results for the quarter ended Oct. 29. The company said that same-store sales decreased 6.9% compared with a year earlier. Net sales fell 7.2%. The company earned 82 cents a share compared with $1.65 a share.
It plans to report full results on Nov. 17.
Kohl’s, with roughly 1,100 stores, has struggled to attract shoppers amid rising competition from discounters, fast-fashion chains and online competitors. Earlier this year, Kohl’s scrapped plans to sell itself to the owner of Vitamin Shoppe—in a debt-funded deal initially worth $8 billion but later reduced. The company’s market capitalization has fallen to around $3 billion.
Ms. Gass wasn’t schooled in the art of selling clothes. She studied chemical engineering at Worcester Polytechnic Institute and received a master’s in business administration from the University of Washington. She then spent six years honing her marketing skills at
Procter & Gamble Co.
before joining
Starbucks Corp.
in 1996.
When she departed the coffee chain after nearly 17 years, founder
Howard Schultz
credited her with helping develop such products as the Frappuccino.
Ms. Gass joined Kohl’s in 2013 as chief customer officer with responsibility for marketing and the e-commerce business. In 2015, her role expanded to chief merchandising officer, and in 2018 she took over as CEO and joined the board.
Ms. Gass had some early success at the helm of Kohl’s, telling her team that they needed to think differently and shouldn’t be afraid to try new ideas. She formed a partnership with
Amazon.com Inc.
that allowed shoppers to use Kohl’s stores to return goods bought at the online retailer. Last year, she wooed Sephora away from JCPenney, where it had operated shops for more than a decade.
She overhauled the merchandise, dropping poorly performing brands such as Dana Buchman, and bringing in new ones, including Tommy Hilfiger, Eddie Bauer and Cole Haan. She expanded the selection of activewear from brands such as
Nike Inc.,
Adidas AG and
Under Armour Inc.
Ms. Gass also simplified discounts and pricing and is refurbishing stores. The company is on track to repurchase $1.3 billion in stock in the current fiscal year.
Yet, the moves haven’t improved Kohl’s business enough to satisfy some shareholders. While sales initially increased, they had started to decline even before the pandemic forced retailers to temporarily shut stores and kept consumers homebound. The company has faced two years with activist investors calling for board changes.
—Dean Seal and Lauren Thomas contributed to this article.
a self-driving trucking company, said Monday it had fired its chief executive and co-founder,
Xiaodi Hou.
The San Diego-based company said in a news release and securities filing that its board of directors on Sunday had ousted Mr. Hou, who was also the board chairman and chief technology officer.
Mr. Hou was fired in connection with a continuing investigation by members of the board, the release said. That review “led the board to conclude that a change of Chief Executive Officer was necessary,” the company said in the release.
The securities filing said that the board’s investigation found that TuSimple this year shared confidential information with Hydron Inc., a trucking startup with operations mostly in China and funded by Chinese investors. The filing also said that TuSimple’s decision to share the confidential information hadn’t been disclosed to the board before TuSimple entered into a business deal with Hydron.
TuSimple said it didn’t know whether Hydron shared, or publicly disclosed, the confidential information, the securities filing said.
Messrs. Hou and Chen didn’t immediately respond to a request for comment.
Mr. Hou’s termination was announced the day after The Wall Street Journal reported TuSimple and its leadership, principally Mr. Hou, faced investigations by the Federal Bureau of Investigation, Securities and Exchange Commission and Committee on Foreign Investment in the U.S., known as Cfius, into whether the company improperly financed and transferred technology to a Chinese startup, according to people with knowledge of the matter.
TuSimple’s stock plunged more than 44% Monday. Shares in the company are down more than 90% for the year.
Investigators at the FBI and SEC are looking at whether Mr. Hou breached fiduciary duties and securities laws by failing to properly disclose TuSimple’s relationship with Hydron, the China-backed startup founded in 2021 by TuSimple co-founder Mo Chen that says it is developing autonomous hydrogen-powered trucks, the Journal reported. Federal investigators are also probing whether TuSimple shared with Hydron intellectual property developed in the U.S. and whether that action defrauded TuSimple investors by sending valuable technology to an overseas adversary.
The Journal also has reported that the board in July began investigating similar issues, including whether TuSimple incubated Hydron in China without informing regulators, the TuSimple board or its shareholders, said other people familiar with the matter. A June business presentation from Hydron viewed by the Journal named TuSimple as Hydron’s first customer, and said TuSimple would purchase from Hydron several hundred hydrogen-powered trucks equipped with self-driving technology. A TuSimple spokesman said the company has considered an agreement to buy freight trucks from Hydron but isn’t a Hydron customer.
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TuSimple’s securities filing on Monday said that TuSimple employees worked for Hydron and were paid, earning less than $300,000. The board wasn’t aware of this nor had members approve it, the filing said. Mr. Chen, who founded and leads Hydron, is TuSimple’s largest shareholder, owning about 11.8% of the company, according to FactSet.
Mr. Hou’s dismissal follows months of upheaval at the company, including the departures of its chief financial officer and chief legal officer and a sharp drop in its stock price. Much of the turmoil began when Mr. Hou took over as CEO in March, said former employees.
In April, one of TuSimple’s autonomous semi trucks crashed on an Arizona freeway. The accident revealed safety and security problems at TuSimple that former employees said leadership had dismissed, the Journal reported in August.
The company said
Ersin Yumer,
TuSimple’s executive vice president of operations, will serve as interim CEO while the board searches for Mr. Hou’s successor. Mr. Yumer previously worked on autonomous-vehicle technology at
Aurora Innovation Inc.,
Uber Technologies Inc.
and Argo AI, the autonomous-driving venture partly owned by
Ford Motor Co.
and
Volkswagen AG
that was shut down recently. Independent board director
Brad Buss,
the former chief financial officer at SolarCity Corp. and Cypress Semiconductor Corp., will be chairman, TuSimple said.
TuSimple said it would release its third-quarter earnings on Monday after the market closes. The earnings release was previously scheduled for Tuesday. The company, ahead of the results, said it remained on track to meet the full-year guidance disclosed in August, including ending the year with a cash balance of about $950 million.
Write to Heather Somerville at heather.somerville@wsj.com and Kate O’Keeffe at kathryn.okeeffe@wsj.com
a former hedge-fund manager and U.K. Treasury chief, formally became Britain’s prime minister on Tuesday after he was appointed by
King Charles III,
vowing to steer the U.K. through a period of growing political and economic troubles.
In his first speech as prime minister, Mr. Sunak warned of a “profound economic crisis” facing the country, which is suffering from stagflation and has recentlyplunged into deeper political uncertainty with three different prime ministers in seven weeks.
Mr. Sunak said he would keep the current chancellor of the Exchequer,
Jeremy Hunt,
who stepped in to undo Ms. Truss’s tax-cut plan and regain market confidence.
Britain’s first Hindu leader pledged to repair the damage caused by the ill-fated experiment in British Reaganomics of his predecessor,
Liz Truss,
who was forced from office after markets were spooked by large unfunded tax cuts and a generous subsidy for household energy costs.
“Some mistakes were made. Not born of ill will or bad intentions. Quite the opposite in fact, but mistakes nonetheless. And I have been elected as leader of my party and your prime minister, in part to fix them,” said Mr. Sunak, as he stood in front of Downing Street. “I will place economic stability and confidence at the heart of this government’s agenda.”
King Charles III welcoming Britain’s new prime minister, Rishi Sunak, at Buckingham Palace on Tuesday.
Photo:
POOL/via REUTERS
Mr. Sunak takes control of a Conservative Party that has its lowest rating in the polls in decades. He will have to orchestrate one of the great political rebrands of recent British political history if he is to lead them to a victory during an election expected in 2024, analysts say.
Mr. Sunak moved quickly Tuesday to steady the Conservative Party. He appointed lawmakers from across warring factions to senior government roles in an effort to rebuild some unity in a party that has ousted its past three prime ministers in as many years. Nearly all the top appointments were cabinet members of former Prime Minister
Boris Johnson,
who was pushed to resign in July by a party rebellion.
In a sign of the challenges facing Mr. Sunak, the new prime minister broke with tradition and didn’t have allies in Downing Street clapping him into the building, underscoring the dark economic times the nation faced as he prepares to oversee some difficult decisions to plug a government budget deficit that is estimated to be 40 billion pounds, equivalent to $45 billion.
“I will unite our country not with words, but with action,” Mr. Sunak said. “I will work day in and day out to deliver for you.”
President Biden spoke Tuesday with Mr. Sunak to congratulate him on his appointment as prime minister, according to a U.K. government readout. The two men discussed bilateral cooperation, including efforts to counter China’s “malign influence,” as well as efforts to bolster Ukraine in its war against Russia.
Mr. Sunak, who at 42 years old is Britain’s youngest leader in more than 200 years, faces a daunting inbox. The British population is struggling with a cost-of-living crisis as inflation runs at 10.1%, fueled by high energy costs because of the war in Ukraine. With financial markets now wary of the stability of U.K. government finances, Mr. Sunak will have to regain market confidence through a combination of politically damaging spending cuts and tax increases, likely aggravating a recession and hurting incomes further, analysts say.
The government is set to outline spending cuts on Monday, only days before the Bank of England is expected to also raise interest rates.
“It’s going to be a terrible time for the economy whoever is in power,” said Jill Rutter, a former government official and a senior research fellow of U.K. in a Changing Europe, a think tank. “It will be very difficult with any government to come through that with the voters saying, ‘That was great.’ ”
Investors have welcomed the end of Ms. Truss’s government and the shift in policy toward more fiscal caution. The pound has fully recovered from its selloff following the tax-cut announcement on Sept. 23, which saw sterling briefly hit a record low of $1.0349. The pound traded at $1.1480 on Tuesday, roughly 2% above its prebudget level.
U.K. government bonds, which were at the heart of the recent U.K. market turmoil, have also staged a strong rally that continued Tuesday as Mr. Sunak took office. The yield on a 10-year U.K. gilt was at 3.647% Tuesday, well below a high of 4.643% set earlier this month, according to Tullett Prebon data. Yields rise as prices fall.
“It’s helpful that we have a resolution, at least for now, to the craziness of the last few weeks,” said Fraser Lundie, head of fixed income for public markets at Federated Hermes in London. “Today and yesterday is the first time where you could start thinking in weeks instead of days. Perhaps in the weeks to come you can start thinking in months.”
But as investors start to take the longer view, they may not like what they see in the U.K. economy, he added. “As the days go on I think people will pretty quickly change their attention from that crazy crisis period back to watching the Bank of England, watching the economic picture. It doesn’t look great to be honest,” he said.
Mr. Sunak’s opening statement came just over an hour after Ms. Truss defended her vision for a low-tax, high-growth economy.
Mr. Sunak takes control of a Conservative Party that has its lowest rating in the polls in decades.
Photo:
HENRY NICHOLLS/REUTERS
“As the Roman philosopher Seneca wrote: ‘It is not because things are difficult that we do not dare. It is because we do not dare that they are difficult,’ ” she said in a farewell speech outside Downing Street before handing her resignation to King Charles. “We simply cannot afford to be a low-growth country where the government takes up an increasing share of our national wealth.”
Polls this week showed that Ms. Truss had the lowest approval rating of any prime minister in modern times, with one survey giving her a 6% approval rating.
The Conservative Party “is in free fall and I don’t know if it has a parachute or not,” said Matthew Goodwin, a politics professor at the University of Kent.
In his cabinet shuffle, Mr. Sunak kept Defense Secretary
Ben Wallace
in his post as well as Foreign Secretary James Cleverly.
Suella Braverman,
who is popular on the libertarian wing of the party and advocates tough migration restrictions, was named as home secretary.
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Mr. Sunak inherits a political machine that is accustomed to rapid rebrands. The Conservative Party, which was founded in 1834, is one of the world’s oldest and most successful electoral franchises. Its success lies in its ability to repeatedly shed its skin and emerge anew to appeal to the ever-changing needs of its electorate.
The past 12 years of Tory government is a prime example. Under Mr. Sunak, the party will have completed an ideological full circle that started when
David Cameron
came into office in 2010 as a social liberal and fiscal conservative, as his government tried to repair the nation’s finances after the 2008 financial crisis. After the Brexit vote in 2016, Theresa May tried to launch the party in a new socially conservative direction. Her successor, Mr. Johnson, remodeled it into a more populist franchise as he bulldozed through Brexit and ushered in a period of state intervention and high taxes. Ms. Truss took over and tried to rapidly dismantle that with an unsuccessful shift toward free markets and lower taxes.
Mr. Sunak is now expected to take it back to the Cameron-era focus on deficits with a degree of social liberalism, embracing issues such as climate change. It is unclear whether the electorate will buy the Conservative Party’s latest rebrand.
Ms. Rutter recalls being in government when the Conservatives successfully retooled their economic policies after the 1992 “Black Wednesday,” when speculator
George Soros
and other hedge funds forced the pound to break its peg to European currencies. Despite their best efforts, the Tories were never fully forgiven by voters and later spent 13 years out of office. Having worked hard to rebuild their brand as competent on the economy after 2010, the Conservatives “had an economic competence premium, and Truss managed to burn through that,” Ms. Rutter said.
In a February speech, Mr. Sunak, then chancellor, laid out his views on the challenges facing the U.K. and other Western economies where economic growth is slowing and productivity is stagnant. He warned that failure by politicians to create the conditions for faster growth would undermine public support for free-market economies and democracy in a world where autocracies such as China are on the march.
Rishi Sunak will become Britain’s new prime minister and the first person of color to lead the country. WSJ’s David Luhnow explains how the former investment banker quickly rose through the ranks to head one of the world’s largest economies. Photo illustration: Ryan Trefes
But he also warned against what he described as two false ideas on how to spur growth. The first was more government spending, regardless of its impact on borrowing and debt. The second was unfunded tax cuts, the idea that slashing taxes will unleash growth that will eventually give the government more money from a dynamic economy to spend on social services and investment. The latter idea is precisely what his predecessor, Ms. Truss, tried and failed to carry out some seven months after Mr. Sunak’s speech.
“The trap of both those ideas—that we can simply boost the economy with public spending, or supposedly self-funding tax cuts—is that they are both highly seductive, easy answers,” he said. “Neither are serious or credible; neither on their own will transform growth; and because they ignore the trade-offs inherent in economic policy, both are irresponsible.”
Instead, Mr. Sunak outlined three areas he called capital, people and ideas aimed at getting businesses to invest more. He said capital invested by British companies averages 10% of annual economic output versus a 14% average in the Organization for Economic Cooperation and Development club of rich countries. He pledged to help drive innovation by creating the right tax and regulatory environment for business to boost capital investment and spending in research and development, called for more vocational training of employees already in the workforce, and a visa system to attract entrepreneurs and high-skilled workers.
“Less ‘build it and they will come’ and more ‘let them come and build it,’” he said.
Mr. Sunak will have to navigate opposition from lawmakers within his own party to increased immigration of any kind.
On Monday, Mr. Sunak warned lawmakers during a private meeting that they had no option but to cooperate if they wanted to avoid losing the next election, according to people present. He is hoping that the Tory lawmakers’ desire for self-preservation will trump their personal ideological leanings, one person added.
Mr. Sunak inherits a healthy majority in Parliament following Mr. Johnson’s 2019 electoral victory and so should be free to push through legislation as long as he can contain rebellions.
Mr. Sunak said he would stick to the 2019 manifesto that helped Mr. Johnson secure his electoral victory. It included a pledge to help left-behind parts of the country and crack down on illegal migration. “I will deliver on its promise,” he said.
—Chelsey Dulaney and Vivian Salama contributed to this article.
Write to Max Colchester at max.colchester@wsj.com and David Luhnow at david.luhnow@wsj.com
faced repeated margin calls on money he borrowed against his Peloton holdings before he left the fitness company’s board last month, according to people familiar with the situation.
As Peloton’s shares slumped over the past year,
Goldman Sachs Group Inc.
GS -2.11%
asked Mr. Foley several times to provide fresh funds or additional collateral for personal loans the bank had extended to him, the people said. The company’s share price has fallen nearly 95% from its $160 peak in December 2020.
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Resigning from the board gave Mr. Foley flexibility to sell or pledge more Peloton shares, though he said the margin calls weren’t the reason he left the company.
“I didn’t resign from the board because I was underwater,” he said. “To the extent that I took on debt through Goldman, it was because I am bullish on Peloton and still am. It was and is a great company.”
The former chairman and CEO had pledged as collateral about 3.5 million Peloton shares as of the end of September 2021, or about 20% of his stake at the time, securities filings show. The pledged shares were worth more than $300 million a year ago. At current prices, they are worth roughly $30 million.
Peloton has cut thousands of jobs this year to stem its losses.
Photo:
John Smith/VIEWpress/Getty Images
Mr. Foley was able to secure private financing and avoid stock sales by Goldman, the people said. He declined to say on Monday how much of his current stake had been pledged or how much he had borrowed against his holdings.
His seat on the board limited his ability to raise additional funds because most public companies prohibit directors and executives from selling their shares during certain trading periods. In addition, Peloton’s policy limits pledges for margin loans by directors or executives to 40% of the value of an individual’s shares or vested options.
Mr. Foley’s decision to leave the board on Sept. 12 followed a tumultuous several months at the company he co-founded a decade ago, as well as a sharp decline in his personal wealth as Peloton’s sagging fortunes diminished the value of his holdings. His stake in the company, worth $1.5 billion a year ago, is currently worth less than $100 million.
“Everyone can see I had a rocky year,” Mr. Foley said. “This was not a fun personal balance-sheet reset.”
Barry McCarthy, a Silicon Valley veteran, became Peloton’s CEO in February.
Photo:
Angela Owens/The Wall Street Journal
In February, Mr. Foley stepped down as Peloton’s CEO and was succeeded by
Barry McCarthy,
a former
Netflix Inc.
and Spotify Technology SA executive. Mr. Foley kept his position as Peloton’s executive chairman and continued to hold a controlling stake in the company through Class B shares with 20 votes apiece.
A few weeks later, Mr. Foley reported selling $50 million worth of Peloton shares in a private transaction. At the time, Peloton said the sale was part of the executive’s personal financial planning. The sale left him and his wife,
Jill Foley,
a former Peloton executive, with 6.6 million shares and options on another 8.4 million, according to securities filings, which combined are currently worth less than $100 million. He hasn’t reported any stock or option sales since March. Business Insider reported in March that Mr. Foley was in discussions with Goldman about restructuring his personal loans.
Peloton’s business deteriorated throughout the spring and summer, with the company in August reporting a $1.2 billion loss and the first ever quarter in which its subscriber numbers failed to grow. The company has cut thousands of jobs this year to stem its losses, including a round of layoffs unveiled last week.
Mr. Foley’s 10-year tenure as CEO was marked by rapid growth and sometimes lavish spending. He took heat from Peloton employees last December for hosting a black-tie holiday party that included some of the company’s celebrity instructors weeks after implementing a hiring freeze. Pictures circulated on Instagram of gown-clad instructors dancing at New York’s luxury Plaza Hotel. Mr. Foley acknowledged on social media that the event caused “frustration and angst” among employees.
Peloton has been on a wild ride, announcing its CEO was stepping down and thousands of jobs would be cut, despite seeing a surge in sales early in the pandemic. Here’s why Peloton became a viral success, and why it’s spinning out now. Photo illustration: Jacob Reynolds
That same month, Mr. Foley paid $55 million to purchase an oceanfront mansion in East Hampton, N.Y., according to real-estate records and people familiar with the transaction. He and Ms. Foley in September put their Manhattan penthouse up for sale. The property, last priced at $6.5 million, is in contract to be sold, according to listings website StreetEasy.
Margin loans, or borrowing against portfolios of stocks and bonds, come with the risk that a broker can call for additional cash or collateral to meet the minimum equity required if a security’s price drops too low. Sharp drops in stock prices during the 2000 dot-com burst and the 2008 financial crisis generated margin calls for executives at well-known companies.
John Foley paid $55 million to purchase this oceanfront mansion in East Hampton, N.Y.
Photo:
PICTOMETRY
Peloton requires directors, executives and employees to get approval for pledging their shares as collateral for margin loans. Other Peloton executives also have pledged some of their Class B holdings, and in the annual report Peloton filed last month, the company warned that investors could be harmed if its stock fell and executives were forced to sell shares.
Goldman has worked closely with Peloton, including when Mr. Foley was the CEO. The investment bank was one of the lead underwriters of the company’s initial public offering in 2019. Goldman bankers also co-led a $1 billion stock offering in November 2021.
Investors initially soured on Peloton—its shares fell 11% the day they made their debut at $29. The stock surged in 2020 during the onset of the Covid-19 pandemic, giving the company a peak market value of $50 billion and making Mr. Foley a billionaire on paper. The shares closed down 3.4% Tuesday at $8.78.
—Theo Francis
and Katherine Clarke contributed to this article.
Write to Sharon Terlep at sharon.terlep@wsj.com and Suzanne Vranica at suzanne.vranica@wsj.com
Group Inc. Chief Executive Kewsong Lee is leaving the private-equity firm, as it struggles to expand and its shares lag.
Carlyle said late Sunday after The Wall Street Journal inquired about the matter that Mr. Lee will step down as CEO immediately and will leave the firm when his five-year employment agreement ends at the end of this year. William Conway, a co-founder and former co-CEO of the firm, will serve as interim chief executive until a permanent successor can be found.
Shares of the Washington, D.C., firm have lagged behind its publicly traded peers since its 2012 initial public offering. Carlyle was slow to branch out beyond the volatile private-equity business and into others, such as credit and insurance, that generate the steady, predictable management fees prized by shareholders.
Mr. Lee’s departure marks a rare instance in which a handpicked successor to a private-equity firm’s founders has been shown the door. Firms such as
Blackstone Inc.
and
KKR
& Co. worked for years on their succession planning, telegraphing it to fund investors and shareholders long before a formal announcement was made.
Mr. Conway and a fellow co-founder,
David Rubenstein,
served as the firm’s co-CEOs until 2018 when they handed the title to Mr. Lee and firm veteran
Glenn Youngkin.
Daniel D’Aniello,
the third co-founder, was chairman until the start of 2018. Mr. Lee, 56 years old, became sole CEO in 2020 when Mr. Youngkin, now governor of Virginia, stepped down to focus on public service.
At the time, Mr. Rubenstein said Mr. Lee was “extremely well positioned to serve as our CEO.”
Mr. Lee set to work simplifying the firm’s structure and streamlining its sprawling private-equity business, trimming the number of funds and integrating its infrastructure and energy businesses into one platform. He focused on expanding Carlyle’s credit platform and bringing the firm into the business of managing insurance assets through the purchase of a big stake in Fortitude Re.
Mr. Lee had successfully launched Carlyle’s long-term fund strategy, and in 2015, the founders granted him authority over the direction of the credit business. The following year, Mr. Lee orchestrated an exit from Carlyle’s struggling hedge-fund business and hired
Mark Jenkins
from Canadian Pension Plan Investment Board to build and lead a stand-alone credit-investment platform.
Assets under management for Carlyle’s credit segment nearly doubled year-over-year to $143 billion in the second quarter, surpassing the firm’s private-equity segment for the first time. Fee-related earnings climbed 65% to $236 million.
Despite these efforts, shares of Carlyle have significantly underperformed those of its peers since Mr. Lee assumed the top spot. Carlyle stock, including dividends, nearly doubled over the period, beating the S&P 500 but falling short of the performance of KKR and Blackstone, whose shares have nearly tripled and quadrupled, respectively.
A relative newcomer to Carlyle, having joined in 2013 from private-equity firm Warburg Pincus LLC, Mr. Lee’s ascension and strategic shift ruffled some feathers at the hidebound firm. A handful of senior investment professionals—some with tenures of two decades or more—left amid the changes.
Before Mr. Lee’s arrival at Carlyle, Messrs. Rubenstein, Conway and D’Aniello had made most of the big decisions. The men remain on the board, with Messrs. Conway and Rubenstein serving as nonexecutive co-chairmen and Mr. D’Aniello as nonexecutive chairman emeritus.
Write to Miriam Gottfried at Miriam.Gottfried@wsj.com
Vince McMahon, the king of U.S. wrestling, retired as chief executive officer and chairman of
World Wrestling Entertainment Inc.,
WWE 0.62%
following disclosures by The Wall Street Journal of multiple payouts to women who had alleged sexual misconduct and infidelity.
In a news release, the 76-year-old executive said his daughter, Stephanie McMahon, and the company’s current president, Nick Khan, will take over as co-CEOs. Ms. McMahon will serve as chairwoman.
“As the majority shareholder, I will continue to support WWE in any way I can,” Mr. McMahon said in a statement.
Stephanie McMahon will serve as chairwoman and co-CEO of WWE following her father’s retirement.
Photo:
Lauren Justice/Bloomberg News
Mr. McMahon didn’t respond to requests for comment, The company has said it is cooperating with the board investigation. Mr. McMahon won’t retain any role in the company’s creative content, according to a person familiar with the matter.
WWE describes Mr. McMahon as critical to the success of the company, which runs the world’s most famous wrestling business and reported record revenue of $1.1 billion last year. WWE said in regulatory filings that losing Mr. McMahon would put its entire business at risk.
Addressing the crowd at the start of WWE’s “Friday Night SmackDown” event in Boston, Ms. McMahon noted her father’s retirement and led the crowd in a chant of “Thank you, Vince.” Appearing emotional, Ms. McMahon mouthed “I love you, Dad,” into the camera.
Mr. McMahon temporarily stepped aside as chairman and CEO in June, when the company’s board of directors announced it would investigate allegations of misconduct against both Mr. McMahon and another executive, John Laurinaitis.
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Mr. Laurinaitis didn’t respond to requests for comment.
The announcement followed a report in the Journal that Mr. McMahon had agreed to pay a secret $3 million settlement to a former employee with whom he had allegedly had a sexual affair.
The Journal later reported that Mr. McMahon had agreed to pay more than $12 million in hush money settlements over the previous 16 years to suppress allegations of sexual misconduct and infidelity.
Those payments went to four women, including a former wrestler to whom McMahon agreed to pay $7.5 million in 2018 after she alleged he had coerced her into performing oral sex.
World Wrestling Entertainment Chairman Vince McMahon during the WWE ‘Monday Night Raw’ show in Las Vegas in 2009.
Photo:
Ethan Miller/Getty Images
The woman alleged Mr. McMahon demoted her and ultimately declined to renew her contract in 2005 after she refused further sexual advances, according to people familiar with the matter. The wrestler and her lawyer approached Mr. McMahon in 2018 and negotiated the payment in return for her silence, the people said.
In another deal, a WWE contractor presented the company with unsolicited nude photos of Mr. McMahon she reported receiving from him and alleged that he had sexually harassed her on the job, according to people familiar with the woman’s 2008 nondisclosure agreement. Mr. McMahon agreed to pay her roughly $1 million, these people said.
And in a 2006 agreement, a former manager who had worked 10 years for Mr. McMahon before he allegedly initiated a sexual relationship with her was paid $1 million to keep quiet about it, according to people familiar with the deal.
In his statement, Mr. McMahon said it had been a “privilege to help WWE bring you joy, inspire you, thrill you, surprise you, and always entertain you.”
WWE in June confirmed details of the Journal investigation and said at the time that a special committee of the board “is conducting an investigation into alleged misconduct” by Messrs. McMahon and Laurinaitis, head of WWE talent relations.
The Stamford, Conn.-based company appointed Ms. McMahon interim CEO in the wake of the investigation. She stepped away from her role as WWE’s chief brand officer in May, writing in a LinkedIn post that she was “taking this time to focus on my family” but that she planned to return.
The 12-member board includes several WWE executives and members of the McMahon family, including Mr. McMahon; Ms. McMahon; her husband,
Paul Levesque,
better known as the wrestler Triple H; and Mr. Khan. Man Jit Singh, a former Sony Pictures Home Entertainment executive, is the lead independent director and is running the inquiry, the Journal reported.
The company on Friday also announced that Mr. Levesque will resume his position as EVP, talent relations.
Write to Ted Mann at ted.mann@wsj.com, Joe Palazzolo at joe.palazzolo@wsj.com and Denny Jacob at denny.jacob@wsj.com
joined forces with labor leaders to oust Chief Executive Officer
Herbert Diess,
who was in the midst of a push to turn the German auto company into a top maker of electric vehicles.
Mr. Diess will be succeeded by
Oliver Blume,
CEO of VW’s sports-car maker Porsche AG and long an ally of the Porsche-Piëch family that controls a majority of VW voting rights. Mr. Blume will retain his job running Porsche, which is slated for an initial public offering this autumn.
The departing chief executive had repeatedly clashed with unions, which hold half the seats on the German equivalent of the company’s board of directors. Until now he had retained the support of the family, heirs to the VW Beetle inventor, Ferdinand Porsche.
Mr. Diess was informed around midday Thursday that the company’s core shareholders and labor representatives had decided to fire him. The broader supervisory board learned of the decision at a meeting at around 4:30 p.m. Friday local time, according to a person familiar with the proceeding.
The sudden ouster comes after renewed internal strife over the slow progress developing core software for the company’s new generation of electric vehicles. The delays have caused the launches of some models to be pushed back, raising doubts among the Porsche-Piëch family about Mr. Diess’s ability to deliver on his promises, people familiar with the situation said.
Herbert Diess is leaving VW as it struggles in developing core software for its new generation of electric vehicles.
Photo:
Ralph Orlowski/Reuters
VW’s leadership crisis has plunged the company’s electric-vehicle strategy into uncertainty and has raised questions about the company’s governance, which is dominated by a triumvirate of family shareholders, the German state of Lower Saxony and the country’s biggest trade union.
“The hope of the supervisory board must be for new group CEO Blume to have more success in guiding the software strategy of the group,” Daniel Roeska, analyst at Bernstein Research, said in a note to clients. “However, it will take months to come up with a new plan, and creating unrest as the group is heading into a challenging 2023 is the wrong time, in our view.”
Mr. Diess couldn’t be reached to comment. Mr. Diess has said that before joining VW, he had turned down a job offer from
Elon Musk,
which has fueled speculation that he could join
Tesla Inc.
if he left VW.
Auto-industry CEOs around the world are wrestling with how best to transition to new technologies—much of which isn’t core to their companies’ expertise and requires different thinking, cost structures and skill sets.
Car executives are under pressure to get ahead of new rivals, many of them in Silicon Valley, which have deeper pockets and are unencumbered by a capital-intensive legacy business focused on making gasoline-powered vehicles.
In Detroit, the leadership at
General Motors Co.
and
Ford Motor Co.
have outlined bold moves in recent years to transform their operations, including the creation of new supply chains for batteries and the hiring of new kinds of talent. Ford this year took the unusual step of splitting its gas-engine and EV operations into two separate divisions, a move that executives have said will help it be more agile in its shift to new technologies.
Meanwhile, investors are aggressively betting on the EV space, trying to figure out who will be the next Tesla.
With gas prices on a wild ride, many consumers are exploring whether buying an electric vehicle could save them money in the long run. WSJ’s George Downs breaks down four factors to consider when buying a new car. Photo composite: George Downs
Mr. Diess has defined the industry’s challenge as shifting from banging metal into cars to developing the skills, resources and vision to create software-defined cars, vehicles that in many ways have more in common with an iPhone than a conventional car. His attempt to catch up with Tesla was hampered by difficulties turning VW into a developer of software, which is the heart of modern electric vehicles and future self-driving cars.
In recent weeks, people familiar with the company said it had rebooted its plan to develop a unified operating system for its cars after trouble delivering the code led VW’s Audi and Porsche brands to postpone the launch of new premium electric models.
It couldn’t be determined whether Mr. Blume would continue to pursue Mr. Diess’s strategy of keeping core software development in-house or whether he would turn to
Alphabet Inc.’s
Google or
Apple Inc.
as some rivals have.
In March, Mr. Blume said he and his management team met senior Apple executives for a meeting at which they discussed a range of potential projects. Mr. Blume disclosed no further details, and it couldn’t be determined what was discussed.
Ferdinand Dudenhöffer,
director of Center for Automotive Research in Duisburg, Germany, said it was to be expected that Mr. Blume would present a new software strategy for the company.
“This big issue of the software-defined car is a huge challenge for conventional auto makers,” Mr. Dudenhöffer said. “Either auto makers will become tech companies like Google, Apple and Microsoft, or they will become dependent on the tech giants.”
Mr. Diess survived several challenges to his position. In December, following a clash with labor representatives, directors stripped him of some of his responsibilities and reshuffled his management team. But this week’s move to push him out came suddenly and wasn’t linked to any single incident, people familiar with the decision said.
At the supervisory-board meeting on Friday afternoon,
Hans Dieter Pötsch,
chairman of the supervisory board and a key ally of the Porsche heirs, presented a deal reached previously with top officials of the IG Metall trade union in a smaller meeting.
The families and union leaders agreed to remove Mr. Diess in the belief that Mr. Blume, 54 years old, who became CEO of Porsche in 2015, would lead with more consensus among management and VW stakeholders, people familiar with the decision said. Mr. Blume, an engineer by training, has long been a favorite of the Porsche-Piëch families and union leaders as a successor to Mr. Diess. But Mr. Blume has repeatedly said he was happy at Porsche.
Once the controlling families decided Mr. Diess had to go, they approached Mr. Blume, people familiar with the family said, and urged him to take the job. Mr. Blume agreed, they said.
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“Blume is seen as someone with a more congenial personality and management style,” one of the people said. “He speaks to his colleagues on the executive board differently and has had success at Porsche.”
According to the people with knowledge of the decision, the Porsche-Piëch family concluded that Mr. Diess’s personality led to repeated conflict within the company and that he didn’t appear to have the software problems under control. While not the only issue that weighed on the family’s mind, the software troubles began to affect new models and eroded the confidence that Mr. Diess could get the issues under control.
Hours before his ousting, Mr. Diess, who will step down on Sept. 1, posted a holiday message to workers ahead of the summer breaks.
“After a really stressful first half of 2022 many of us are looking forward to a well-deserved summer break,” he wrote on LinkedIn. “Enjoy the break—we are in good shape for the second half.”
Mr. Diess joined VW in 2015 from
Bayerische Motoren Werke AG
, initially as chief of the VW brand. In that role, he began to lay the groundwork for VW’s electric-vehicle strategy, a plan that has seen VW’s brands, including Porsche, Audi, Seat, Škoda, Lamborghini and Bentley, develop core electric models with a plan to shift fully to EVs this decade.
Under Mr. Diess’s leadership, VW embarked on a plan to build battery cell manufacturing companies around the world to power its new generation of EVs. It recently announced that it would create a new company in the U.S. under the Scout brand to build rugged, off-road electric trucks and SUVs. The move is part of a focus to rebalance the company’s heavy reliance on the Chinese market, where it makes 40% of sales.
While union leaders have acknowledged Mr. Diess’s strategic vision and his achievement in transforming VW’s culture for the EV age, they have questioned his ability to execute, as highlighted by the software problems.
Daniela Cavallo,
the head of VW’s works council, has said Mr. Diess had failed to involve employees in key decisions. She criticized him on his warning to the supervisory board last year that 30,000 jobs at its flagship plant were at stake if VW failed to accelerate its EV shift.
In a statement, Ms. Cavallo said the VW group “wants to emerge strengthened from the historical change in the world of mobility in a leading position. However, it is also our aim that, despite the great challenges, job security and profitability remain equal corporate goals in the coming years.”
Mr. Blume joined Volkswagen in 1994 and has held management positions for the brands Audi, Seat, Volkswagen and Porsche.
“Oliver Blume has proven his operational and strategic skills in various positions within the group and in several brands and has managed Porsche AG from a financial, technological and cultural standpoint with great success for seven years running,” Mr. Pötsch said. VW said Mr. Blume would continue as chief executive of Porsche after a possible IPO.
—Christina Rogers contributed to this article.
Write to William Boston at william.boston@wsj.com and Georgi Kantchev at georgi.kantchev@wsj.com
