Steve Jobs, Apple’s legendary co-founder and former CEO, died more than 13 years ago. Imagine his reactions if he came back to life and accompanied his successor Tim Cook to visit an Apple store, one of Jobs’ many innovations.
Jobs no doubt would appreciate the iPhone’s integration of technology that wasn’t available when he was alive, but he could still pick up the latest version and instantly know how to use it.
The iPad would be familiar to Jobs because it was developed under his watch, despite legions of naysayers who said there wasn’t a market for such a product. Jobs likely would appreciate the iMac’s refinements and advancements, but the computer would still feel awfully like the one he was using before he passed.
The Apple watch is the only major product that’s been developed since Jobs’ passing. I’m doubtful he’d be all that wowed, expect perhaps that consumers are willing to be $399 for a wearable miniature iPhone.
“What else have you developed since I’ve been gone,” I imagine Jobs asking.
“Other than the Apple watch, and refining the products you created, that’s it,” Cook would reply. “We were working on a car to compete with Tesla, an electric vehicle manufacturer that’s achieved great success, but we threw in the towel a year ago because we just couldn’t pull it off.
“Unlike when you were around, Apple’s culture is one that prefers to coast, rather than set the bar too high and take big innovative risks like you did. Instead, we prefer to enrich our shareholders, which is why we spent $687 billion buying back 35% of Apple’s outstanding stock these past 10 years, making me and Apple a darling of Wall Street. Apple today is valued at $3.6 trillion, a lot more than the measly $318 billion it was worth when you died.”
Allow me to introduce you to Lei Jun, who the Wall Street Journal featured today in a story that should serve as a wake-up call about why China has blown out GM and Ford and likely relegated them to the national corporate disgrace bin along with Boeing. Lei is affectionately known as the Steve Jobs as China, in part because the billionaire entrepreneur in 2010 founded and runs a smart phone company called Xiaomi, whose products are more affordable than Apple’s.
Lei five years ago concluded he needed diversity, and not the DEI kind the Biden Administration and the corporate media said makes companies more competitive.
In 2021, when GM CEO Mary Barra went on CNBC vowing that GM would “absolutely” be selling more EVs than Tesla within four years, Lei told his board that Chinese consumers regarded cars as an extension of people’s digital lives.
“It’s the future and Xiaomi must be part of it,” Lei told his directors. He estimated the development costs at $10 billion.
Unlike Barra, who initially focused on building luxury EV trucks and SUVs heavily subsidized by U.S. taxpayers courtesy of her good friend Joe Biden, Lei believed Chinese consumers wanted an affordable and sporty sedan, costing less than a Tesla and with a range of more than 400 miles. Lei considered it a given that Xiaomi’s vehicles had to seamlessly connect with Xiaomi’s smartphones and other smart devices.
Xiaomi is already selling its first car, the SU7, a Porsche look-alike that starts at around $30,000 and for which Chinese consumers must wait six months to get one. The SU7 is better than any EV available to U.S. consumers, and don’t take my word for it.
A car enthusiast and professional race car driver named Jim Farley got his hands on a SU7 to test drive for about six months and was gaga about the vehicle.
“It’s fantastic,” Farley said on an October podcast. “I don’t want to give it up.” The maker of the sporty sedan, he said, was “the Apple of China.”
Yeah, we’re talking about that Jim Farley, CEO of Ford Motor Co.
Mind-blowing manufacturing
Xiaomi’s manufacturing capabilities are truly mind-blowing.
According to the Journal, Xiaomi utilizes large-scale, high-pressure aluminum die-casting to create car frames, a process also used by Tesla. Automakers traditionally forge dozens of parts separately and weld them together. The Xiaomi machine, several stories high and two basketball courts long, creates a car frame as a single piece in 100 seconds, taking molten metal heated to 1,300 degrees Fahrenheit and dunking the shape into 45-degree water to harden it.
To assemble the car, more than 700 robots work in unison in what is known as a dark factory—so automated that the plant could potentially operate with the lights turned off.
The Journal didn’t explain how Xiaomi went from a standing start to such advanced automation, except to say that founders of fellow EV startups Xpeng and NIO offered Lei tips in the hopes that Xiaomi could give the entire EV industry credibility. Unlike many American CEOs, China’s chief executives are patriotic, and all seemingly want Team China to prevail.
One competitive advantage Xiaomi enjoys is it can turn to domestic suppliers for most of the company’s materials and parts. Tesla was instrumental in helping China develop its ecosystem, which founder Elon Musk agreed to do in exchange for getting special privileges to manufacture and sell vehicles in the country. The Journal previously reported that China’s leader Xi Jinping regards Musk as a “technology utopian with no political allegiance to any country.”
Bloomberg previously reported that Musk wanted to help China’s parts manufacturers expand in Mexico.
Xiaomi is the world’s third-largest smartphone maker by unit sales after Apple and Samsung and more than half its revenues still come from smart phone sales. But the company is already looking to develop luxury cars to compete with higher-end global automakers like BMW.
Lei isn’t a braggart and avoids boasting that he will overtake BMW in luxury vehicle sales.
“My current priority is to simply get a seat at the table,” Lei said. “Unlike Steve Jobs, I’m more pragmatic and willing to show humility.”
Another China EV success
Xiaomi isn’t China’s only automotive EV success story. Another is BYD, which the media typically mentions is backed by Warren Buffett’s Berkshire Hathaway. What’s rarely mentioned is that Berkshire Hathaway’s investment in BYD predated the company’s EV success. Like Xiaomi, BYD initially sold mobile phones, as well as electric batteries.
As recounted in this fascinating April 2009 story by Marc Gunther, Berkshire made its BYD investment because Buffett’s friend and longtime partner Charlie Munger was blown away with founder Wang Chuan-Fu, who Munger likened to “a combination of Thomas Edison and (former GE CEO Jack Welch) – something like Edison in solving technical problems, and something like Welch in getting done what he needs to do. I have never seen anything like it.”
Buffett is famous for only investing in companies he perceives as having superior management. Notably, Berkshire Hathaway was once a major investor in GM but dumped its holdings years ago.
Barra’s stock buybacks
So how is GM CEO Mary Barra positioning GM to take on China’s seemingly unstoppable prowess? Spending more than $20 billion on stock buybacks to boost GM’s shares that have underperformed during most of her more than 10-year tenure as CEO, while paying herself some $28 million a year.
Notably, Boeing spent tens of billions on buybacks rather than investing in R&D, which is why it deteriorated the way it did.
I’m heartened that I’m no longer alone in my biting criticism of Barra. The video below is a damning critique of Barra’s leadership and makes clear that GM has deteriorated far more than I understood. According to the unidentified engineer responsible for the video, GM was forced in to bankruptcy in 2008 because it blew billions on stock buybacks, while former Ford CEO Alan Mulally had the wisdom and pride to horde cash in the event of a downturn.
The video is kindly to Ford’s Farley and gives him a pass for all the recall issues under his watch. It rightly gives Farley credit for his love and commitment to the success of the automotive industry and his valiant but so far unsuccessful efforts trying to keep Ford competitive.
The video is superbly written and edited, and worth watching. Unfortunately for Barra, if the video attracts too many viewers, she’ll soon be soon out of a job, perhaps providing an opportunity for someone to save GM before the automaker’s history repeats itself.