Rivian Makes a Bold Move To Solve Its Biggest Problem – TheStreet

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In the world of fencing, when a fencer moves too far back to avoid danger, they end up with their back to the wall. 

So they have no other choice but to face their adversary. 

This is the situation in which the young manufacturer of electric vehicles Rivian Automotive  (RIVN) – Get Rivian Automotive, Inc. Class A Report finds itself. The automobile group now knows that it must act and face up to its difficulties after having missed its production targets.

So act. 

Rivian has just made a major change by making an unexpected appointment to a top manufacturing position just as the company is ramping up production at its Normal, Illinois plant and getting ready to start the construction of its second car manufacturing site in Georgia.

Tim Fallon, a former Nissan executive, will now serve as vice president of manufacturing operations. He replaces Erik Fields, also a former Nissan executive. Fields only stayed 16 months in his post.

“Tim Fallon has joined the Rivian team, effective Monday, February 14, as the Vice President of Manufacturing,” told TheStreet in an email Miranda Jimenez, a spokesperson. “He will be based at the Rivian vehicle plant in Normal, Illinois.”

As for Fields, “who has served as VP Manufacturing since September 2020, will be transitioning out of the role. Rivian appreciates the warmth and leadership he brought to the factory floor, and wishes him well in his next venture,” Jimenez added.

Can Rivian Manage Production Rate Increases?

Fallon joins Rivian from a 15-year career at Nissan, where he served as Vice President, Manufacturing at the Nissan Canton Vehicle Assembly Plant in Canton, Mississippi.

The change comes as Rivian tries to prove to skeptics and markets that the maker it can handle increased production rates. Rivian is expected to provide an update on its production status when the automaker releases its quarterly results on March 10.

The company, which counts Amazon  (AMZN) – Get Amazon.com, Inc. Report (17.74%, according to FactSet) and Ford  (F) – Get Ford Motor Company Report (11.42%) as shareholders, admitted during its quarterly earnings in December to experiencing difficulties in its supply chain and to ramp up production.

It said that production would fall “a few hundred vehicles short” of its goal to make 1,200 EVs by the end of 2021. On January 10, Rivian announced that it had produced 1,015 vehicles throughout 2021, and delivered 920 cars. And Chief Operating Officer Rod Copes left the company.

“Launching and ramping production of three different vehicles within a few months is an incredibly tough challenge. This production ramp requires the simultaneous ramp of our supply chain, hiring and training of our product workforce, equipment bring-up, and rapid iterations through production quality loops. These challenges have been exacerbated, given the state of our global supply chain, tight labor market, and of course the complications from Covid,” Chief Executive Officer RJ Scaringe said.

But Scaringe was also optimistic, as TheStreet’s Daniel Kline wrote.

“Just as we’re scaling our manufacturing facility, hundreds of our suppliers are also scaling their production to match our vehicle ramp rate. Our procurement team has remained nimble and continues to work with our supplier partners across all tiers to mitigate issues stemming from our supply chain delay of market delay to market and the Covid pandemic. Given the uncertainty within the supply chain, we decide to carry higher inventory levels than presumably assumed to help ensure we consistently have parts to build. The good news is we do not believe any of our supply chain challenges represent long-term systemic issues,” the CEO said.

The Confidence of Two Billionaires

Nevertheless, these reassuring remarks did not reassure the markets. Rivian shares, which made their stock market debut on November 9, fell sharply. It has stabilized somewhat recently but is still moving away from its IPO price of $78 a share. Rivian stock closed at $66.37 on Wall Street on Friday, down 15% from its stock market debut. It closed at a record high of $172.01 on November 16.

The enthusiasm that accompanied the IPO of the young electric vehicle manufacturer is based on the fact that it offers larger and bulkier models with the potential to respond more to consumer tastes than Tesla  (TSLA) – Get Tesla Inc Report cars, for example. Rivian has in its portfolio the R1T truck with a base price of $67,500 and the R1S SUV with a starting price of $70,000.

The Illinois automaker has increased production rates recently, according to Bloomberg. Rivian is producing almost 200 delivery-ready units a week, after averaging about 50 units a week through the end of December.

Rivian has received in recent days the confidence of two legends of hedge funds.

Iconic investor George Soros’ investment company Soros Fund Management snapped up almost 20 million shares last quarter, the firm disclosed the stake in a Securities and Exchange Commission filing. The stake was worth $2 billion when Soros Fund Management bought it, but it’s now worth about $1.33 billion. 

Billionaire Dan Loeb’s hedge fund, Third Point, also revealed ownership of 4,046,572 shares of Rivian for the quarter ended Dec. 31, 2021, according to a SEC filing.

We have to wait until the beginning of the second quarter when hedge funds will have to publish the state of their portfolios to find out if Soros and Loeb still hold Rivian shares.