Supply Chain Nightmares: From Hacked Jaguars to Presidential Meddling

Politics and business collide as Trump makes unfounded claims about Tylenol causing autism while Jaguar Land Rover faces a devastating cyber attack costing £50 million weekly and threatening its entire supply chain network.

• Trump administration announces FDA warning labels for Tylenol (paracetamol) linking it to autism despite scientific evidence contradicting this claim
• Tesla's UK profits drop 40% as average car prices fall by £7,000 amid broader European sales decline
• Trump administration meddles with Orsted's wind energy projects, forcing the company into a £7 billion rights issue
• JLR suffers massive cyber attack halting all production since August 31st, with potential losses reaching £2 billion
• UK government provides £1.5 billion loan guarantee to protect JLR's supply chain of 700 suppliers and 150,000 jobs
• Multiple upcoming episodes will explore political rhetoric vs scientific evidence, and ethics in business

Join us next time for another edition of Chain Reaction where we'll continue analyzing the critical connections between politics, supply chains, and business.

Chapters

• 0:00 Trump's Tylenol Autism Claims Debunked
• 3:11 Tesla's Profit Decline in UK Market
• 5:10 Trump vs. Renewable Energy Projects
• 8:14 JLR's Devastating Cyber Attack
• 14:03 Government Loan Support for JLR
• 18:53 Upcoming Episodes Preview

Transcript

TonyHines: 0:12

Subscribe to Chain Reaction you'll be first to know when new episodes are out. And never miss an episode. Well, President Trump is often not shy of coming forward to call people stupid. But here's what's stupid. The announcement this week that Tylenol or paracetamol is the cause of autism. The President Donald Trump and Health Secretary Robert F. Kennedy Jr. have claimed that autism is an epidemic, and it's linked to mothers taking Tylenol paracetamol while pregnant. Nature this week said the science does not support this. On Monday, US President Donald Trump announced that the US Food and Drug Administration, the FDA, will put a warning label on the painkiller Tylenol, also known as acetaminophan and paracetamol, because it flags an association, a possible association with autism in children. But there's a lack of strong evidence to back up this claim. We know of course association can be a relationship shown through correlation, but we also know that correlation doesn't show causation. So you have to be careful of making that kind of leap. Scientists, of course, would know this. Another drug called Leucovorin will help hundreds of thousands of children with autism, FDA head Martin Mackery said, at the same event. But some specialists warn that the drug is not widely available, that its efficacy has not been established, that scientists don't know how much of the drug to give or how long people should take it for, and there's no safety data. So doesn't that sound stupid? I think it is. And I think if you're thinking about taking thalanol or paracetamol, then you should follow the medical advice. Not from a president and the administration that's not qualified to tell you, but from your medical advisor. Now this has implications of course for supply chains in lots of different ways, about how drugs reach the market, and ultimately end up in the hands of the patients or the customers that decide to buy various drugs. And of course, pharma companies could pay to promote their products over other products or to damage other company products. So what's actually going on here? That's the question. Stupidity or something worse. Tesla's UK profits have fallen by forty percent last year, as it was discounting electric cars and it's got higher finance costs that are eating into those revenues. Revenue of course has also dropped by twenty percent to one point nine four billion. The volumes of cars held up at forty nine thousand seven hundred sold in twenty twenty four, marginally ahead of the previous year, but the average price of a car fell by more than seven thousand pounds in the UK per unit to about thirty two thousand six hundred pounds. Tesla said that the decline was driven by product mix, incentive programs, and the launch of the Model Y, which is its cheapest car. Its financing costs rose by sixty five percent to thirteen point four million pounds, and its pre-tax profits were down to nineteen point four million from thirty two million pounds in the previous year. Tesla Motors limited profits nearly halved to twelve point seven million pounds from twenty three point six million pounds after tax. Well Tesla's been having a tough time not only in Europe but also in the United States. Tesla sales year on year to August in Europe fell by twenty two percent in the first eight months of the year. That's sixty five thousand fewer cars in the EU compared with the same period a year earlier in twenty twenty four, so down to one hundred and thirty three thousand from one hundred and ninety-eight thousand in that previous year. Now you might recall that uh Orsted is the wind energy company that had eighty percent of projects in the United States complete, and it was looking to recapitalize the business a few weeks back. But the US administration, under Trump, because he doesn't like wind energy and clean fuel, he thinks it's all a scam. He said that this week, didn't he? In his speech to the United Nations, that garbled speech that he gave. He just talks in headlines, really, trying to hog the news, but uh this week Orstead is in talks to sell half of its biggest wind farm to Apollo. It'll be the world's largest offshore wind farm. It's off the coast of Yorkshire, and uh the Triple Danish Energy Company, it wants to sell that wind farm to the New York based Apollo Global Management Group, which oversees assets of about eight hundred and forty billion dollars, and it's in talks with Orstead about acquiring fifty percent of Horn C three, an eight point five billion pounds project that started construction in twenty twenty three, and it's capable of powering about three million UK homes. The transaction would boost Orsted cash flows and protect it because it's under pressure from rising costs because of the backlash against renewables from the Trump administration. The two point nine gigawatt Hornsi III project is one hundred and sixty kilometers off the Yorkshire coast and it will come online in twenty twenty seven. As I mentioned in a previous podcast, Orsted started life as Dong Energy, the Danish state oil and gas group, and it's become the world's leading developer of offshore wind farms. In August, Trump ordered a halt to Orsted's nearly finished revolution wind project off Rhode Island. The company has, however, resumed work on the project after a ruling from a federal judge on Monday, which overturned Trump's decision. The Danish group also blamed the United States for forcing it into a seven billion pounds rights issue, arguing that the move by the Trump administration had scuppered the plan to sell a stake in its sunrise wind project off New York. Separately, the company announced back in May that pressure from higher interest rates and supply chain costs meant it was cancelling plans to build Horn C four in the North Sea, and that of course is a big setback to the UK government's plans to go green. So all that meddling by Trump and his administration into these business arrangements can really damage the supply chains of companies and the financial arrangements that they have in place, and of course projects that are already underway. And the states where those projects were to lead to them getting the electric from those plans in the United States are also going to incur costs because they're going to have to find different ways to acquire energy. So he's a meddler, the Tinkerman strikes again. Now I suspect one of the biggest stories in supply chains this week in the United Kingdom is the Jaguar Land Rover cyber attack. Been going on for a few weeks now, and production is not expected to start any time soon. It's one of the biggest cyber attacks that's happened to a business. It's been exhausting for the business itself, having lots of meetings, working round the clock trying to establish the cause and understand what's actually happened in the computer systems. It's the UK's biggest car maker, JLR, and it suffered a massive breach of the systems on august thirty first, and global production stopped. Dealers were unable to register their new cars, and thousands of workers have been sent home. It came on the eve of the biggest week of the year for car sales, the launch of the seven hundred six number plate. That's always a time when there's lots of new sales, and of course thousands of customers will have been left without the vehicles, the ones that they ordered. Global supply chains are said to be on their knees as a result of this attack. It started on a Sunday, but the enormity of the cyber attack only became clear a day later, and the company made an announcement. We have an incident. Slight understatement, I feel. Experts have said that the JLR attack will eventually rank as Britain's costliest. It's said to be costing about fifty million pounds to the company every week. Questions of course are being asked of the IT partner for JLR, which of course is the parent company's Tata Consultancy Services TCS, and it's the third hack that they've suffered this year. Interestingly, TCS was also the IT provider for Marks and Spencer and the co-op, and both of them too were hacked this year with costly consequences. Back in March they had a first attack which was a Hellcat ransomware group who apparently stole logging credentials from a contractor to gain access to systems. But it's the third attack that took place in September, which is also by the same group. That's been the biggest problem. They've exploited the vulnerabilities in business management software called SAP Netweaver. SAP of course is a big supply chain partner, and it's critical in many supply chain systems. The UK government is under pressure to help the suppliers in the supply chain that feed JLR's production. Many of these firms are small medium sized enterprises located around the hub of production. So for example, JLR in the Midlands, in Wolverhampton and places will have a network of suppliers that furnish the components and small parts for the company. And their work too has come to a halt, and their jobs too are under threat. Many of JLR's suppliers also work for other British based automobile companies such as BMW and Mini, so it could damage other companies as well if these companies aren't able to continue with their operations. JLR is acutely aware of the fallout from the crisis. They've said there's a whole ecosystem that relies on us. The scale of this is absolutely not lost on the leadership team. And of course they'll have to do something to help out here. They are a cash rich company. They turn over huge amounts of money with the global businesses, and it shouldn't really fall to taxpayers in the United Kingdom to bail them out of a difficult situation. They were said to be in negotiations to ensure their supply chain security, but that hadn't been completed by the time of these attacks, so they're not insured for this particular attack, it would appear. About thirty thousand people are directly employed at company plants, and a hundred thousand work for firms in the supply chain. So although it might just be like a virus, forgive the pun for JLR, it could be terminal for those smaller suppliers. Interim payments of three hundred million pounds have been provided to the most cash strapped smaller suppliers in the past week, and more is scheduled next week from JLR. So they are doing something to try and help those suppliers. There's been talk of loans or a furlough type scheme being supported by the UK government, but the UK government's finances are also not particularly strong enough to deal with something of this nature, and there is a question mark about whether public money should be used to pay for this type of problem. The best way probably to deal with it would be to offer loans, not to get directly involved in purchasing, which has been mooted to help out these smaller companies, and not to give a furlough scheme which could be rather expensive, but to simply offer loans to companies that are distressed. But again, it all carries risk because there's the risk of not being paid back. It's believed that the cost of lost production at JLR could be around two billion pounds. The timeline of the attack on Jaguar Land Rover began on august thirty first. It led to significant operational disruption, production halts, and data theft. On august thirty first, the initial cyber attack commenced. On september first, JLR poised production across all facilities. On september twenty second, production lines ceased for three weeks impacting thousands of employees and risks to the broader automotive supply chain. The production halt forced JLR to suspend operations at several UK plants, and lost production about one thousand cars per day. The company faced losses approximately five million pounds. That's about six point eight million dollars due to the shutdowns. Initially, JLR claimed that customer data was secure, but it was later confirmed that sensitive information had been compromised. The extent of the data breach is not yet fully understood. The attack severely affected the supply chain, leading to layoffs and financial distress amongst suppliers. Many workers were advised to apply for state benefits because of the uncertainty and the risk to their jobs. The ongoing disruptions could result in losses about fifty million pounds every week, and it puts at risk a number of small and medium sized suppliers in the supply chain. In late September, parts of the IT system are coming back online with phased restarts, and the company is working with cybersecurity specialists and law enforcement to investigate the breach and secure systems. It's working with the UK government regarding potential support for affected suppliers and employees, and the government is reviewing whether to intervene financially to alleviate the crisis. A group known as Scattered Lapsus Dollar Hunters has claimed responsibility for the cyber attack, linking it to several notable cybercrime organizations with a history of targeting major firms. The global turnover of the company is about thirty five billion US dollars, that's about thirty billion pounds. And profit before tax is about three hundred and fifty one million pounds. Profit after tax is about two hundred and forty eight million, and that's down from five hundred and two million the year earlier. JLR has one hundred and twenty eight sites worldwide. About a hundred million pounds value added through reuse and refurbishment initiatives within industrial operations moves through the supply chain. An investment in next generation electric vehicles with production lines means that it's going to be a lot more than that when we add those in and components. JLR has put about 18 billion pounds over five years from twenty twenty four to twenty nine to support next generation vehicle development. And that investment's gone into infrastructure and supply chain upgrades. Earnings before interest and tax are about four percent. The latest update as we go to press on this particular episode is that the government will support Jaguar Landrover through a government backed loan. JLR is owned by India's Tata Motors. They typically make about one thousand cars a day, at three factories in the United Kingdom, in Sullyhull, and Wolverhampton in the West Midlands, and Halewood in Merseyside. Small suppliers had told them that they had just one week left before the cash runs out. No cars have been built this month, and the company stopped placing orders with its seven hundred suppliers. The company operates the biggest supply chain in the UK automotive sector and it employs about one hundred fifty thousand people. The government will underwrite a one point five billion loan guarantee to Jaguar Landrover in a bid to support its suppliers as the cyber attack continues to halt production. The business secretary in the UK, Peter Kyle, said that the loan is from a commercial bank and it would protect jobs in the West Midlands and Merseyside and across the UK. It's a government backed loan under the Export Services Guarantee Scheme, but the loan is through commercial banks. So this sounds like a good support from the UK government to protect those jobs in the wider supply chain. The loans have to be paid back over a period of five years, which will give the company breathing time and keep its cash flows positive. Now there are some interesting episodes that are coming your way in the next few weeks, so keep an eye out for them. First down the track is political rhetoric and scientific evidence don't always align. Well, you might remember President Trump talking about various claims, often without evidence, generally opinionated, and sometimes, if not always, misleading. So that'll be an interesting episode to see how that can be so damaging to business. Recent episode also the supply chain pulse is something you might want to drop by and take a listen to that reports the president's visit to the United Kingdom. He had a state visit, if you remember, about a week or two back, and uh he had dinner with uh the great and the good at Windsor Castle, including King Charles III. And the news out of that one is reported in Supply Chain Pulse. And then there's an interesting episode focused on Follow the Money, how Taiwan's banks are redrawing Asia's financial maps. So that would be an interesting one to drop by and have a listen to too. And then there's an episode called Ethics at the Core. And I think that's important. It's a different type of episode than maybe the normal, but it says why ethics is important in business and why it's important in supply chains. So all those episodes coming your way and more. Thanks for joining us on Chain Reaction. I hope you've enjoyed the episode, hope you've learned something new, and I hope you'll come back next time. When we'll have another edition of Chain Reaction. Until then, take care. I'm Tony Hines, I'm signing off, and I'll see you next time. Bye for now.