WEN - Wall Street Breakfast Podcast: GM Stellantis Face $9.5B In Fines

2023-10-03 07:00:36 ET

Summary

• General Motors and Stellantis could face fines of around $9.5 billion under the Biden administration's proposal to increase fuel economy standards.
• McDonald's and Wendy's have won a lawsuit accusing them of misleading customers about the size of their hamburgers.
• WeWork has chosen not to make two interest payments totaling $95 million as it looks to negotiate with lenders.

Listen below or on the go on Apple Podcasts and Spotify

GM, Stellantis ( STLA ) on hook for $9.5B in fines under fuel economy proposal - report. (00:28) McDonald's ( MCD ) and Wendy's ( WEN ) win a hamburger legal battle while Burger King preps for trial. (01:40) WeWork ( WE ) $95M interest payments as it looks to negotiate with lenders. (03:02)

This is an abridged transcript of the podcast.

General Motors (NYSE: GM ) and Chrysler maker Stellantis (NYSE: STLA ) could face around $9.5 B in overall fines under the Biden administration's proposal to hike fuel economy standards through 2032, Reuters reported citing a trade group's letter.

GM ( GM ) is expected to face $6.5B in fines, while Stellantis ( STLA ) could be on the hook for $3B, according to a letter by the American Automotive Policy Council - which represents Detroit's Big Three - to the U.S. Energy Department.

The group said the potential fines for not meeting the proposed Corporate Average Fuel Economy ( CAFE ) requirements are "alarming."

Ford Motor ( F ) could face ~$1B in penalties, while Volkswagen ( OTCPK:VWAGY ) may have to shell out over $1B.

GM ( GM ), Stellantis ( STLA ) and Ford ( F ) face $2.15K per vehicle in compliance costs, much higher than the $546 per vehicle on average sold by other automakers.

The proposed policy "would reward those auto manufacturers resisting the transition to a fully electric future the most," the letter said .

If automakers are unable to meet CAFE requirements, they can buy credits or pay penalties. GM ( GM ) and Stellantis ( STLA ) previously paid $363M in CAFE fines.

A lawsuit accusing both McDonald's (NYSE: MCD ) and Wendy's (NASDAQ: WEN ) of misleading customers in advertising about the size of their hamburgers has been dismissed.

A judge ruled that he did not see proof that the fast-food chains delivered smaller burgers than advertised, or that the plaintiff had even seen ads for the McDonald's Big Mac and Wendy's Bourbon Bacon Cheeseburger that were the basis of the lawsuit.

The plaintiff's legal claim was based on ads he maintained were intentionally undercooked beef patties, which were allegedly larger than the actual cooked versions.

Restaurant Brands International's (NYSE: QSR ) Burger King is also facing a similar lawsuit regarding the accuracy of their product representations.

Burger King is set to go to trial over the chain making its Whopper burger appear larger on menu boards than its actual size.

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WeWork (NYSE: WE ) is down 1.4% premarket as the company said it would not make two sets of interest payments totaling about $95M.

The company has a 30-day grace period to make the interest payments before non-payment constitutes an 'event of default'.

WeWork ( WE ) disclosed in a filing that the payments were due on October 2.

This move is an attempt to allow talks with lenders, renegotiate leases with landlords while also enhancing its liquidity. WeWork ( WE ) said it does have the liquidity to make the interest payments.

The company’s interim chief executive said it’s unclear how the landlord negotiation will play out and added that no decisions have been reached regarding filing for bankruptcy.

Other headlines to look out for on Seeking Alpha:

DraftKings, FanDuel see huge increases in Travis Kelce prop bets

Microsoft CEO testifies that Google will expand search dominance with AI

Cleveland Fed's Loretta Mester sees one more rate hike this year

On our catalyst watch for the day,

• Zoom Video's ( ZM ) annual Zoomtopia event will begin in San Jose, California. The company has laid out long-term targets at the event in past years.

• The criminal trial of FTX founder Sam Bankman-Fried will begin in Manhattan.

• The Fortune CEO Initiative will include a panel covering the new frontiers of business and AI, with the CEO’s of IBM ( IBM ) and Qualcomm ( QCOM ). Cloudflare ( NET ) CEO Matthew Prince will also be at the event talking separately on unlocking AI's potential securely.

U.S. stocks on Monday kicked off the new month and the last quarter of the year with a mixed performance.

The Nasdaq ( COMP.IND ) led the three major averages, rising 0.67%. The S&P 500 ( SP500 ) ended little changed, while the Dow ( DJI ) slipped 0.22%.

Of the 11 S&P sectors, eight finished in negative territory, led by a retreat of nearly 5% in Utilities. Communication Services, Tech and Consumer Discretionary were the three gainers.

The 10-year yield ( US10Y ) soared 12 basis points to 4.69%, while the 2-year yield ( US2Y ) was up 7 basis points to 5.12%.

Now let’s take a look at the markets as of 6 am. Ahead of the opening bell today, Dow, S&P and Nasdaq futures are mixed. The Dow is flat, the S&P 500 is up 0.06% and the Nasdaq is up 0.05%. Crude oil is up 0.3% at more than $89 a barrel. Bitcoin is down 2.5%.

In the world markets, the FTSE 100 is up 0.3% and the DAX is down 0.4%.

The biggest stock movers for the day premarket: Delta Apparel (NYSE: DLA ) is up nearly 18% after the firm received an unsolicited takeover bid for its Salt Life business unit.

On today’s economic calendar, at 8:00am the Fed's Raphael Bostic: will participate in a moderated conversation before the Leadership Atlanta roundtable. The topic is the "Economic Outlook for 2024: Inflation, Rising Interest Rates, Labor Market, and Uncertainties." Also, at 10 am the Job Openings and Labor Turnover Survey.

For further details see: