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Chinese giant DJI hit by U.S. tensions, staff defections

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By David Kirton

SHENZHEN, China (Reuters) – Chinese drone giant DJI Technology Co Ltd built up such a successful U.S. business over the past decade that it almost drove all competitors out of the market.

Yet its North American operations have been hit by internal ructions in recent weeks and months, with a raft of staff cuts and departures, according to interviews with more than two dozen current and former employees.

The loss of key managers, some of who have joined rivals, has compounded problems caused by U.S. government restrictions on Chinese companies, and raised the once-remote prospect of DJI’s dominance being eroded, said four of the people, including two senior executives who were at the company until late 2020.

About a third of DJI’s 200-strong team in the region was laid off or resigned last year, from offices in Palo Alto, Burbank and New York, according to three former and one current employee.

In February this year, DJI’s head of U.S. R&D left and the company laid off the remaining R&D staff, numbering roughly 10 people, at its flagship U.S. research centre in California’s Palo Alto, four people said.

DJI, founded and run by billionaire Frank Wang, said it made the difficult decision to reduce staffing in Palo Alto to reflect the company’s “evolving needs”.

“We thank the affected employees for their contributions and remain committed to our customers and partners,” it said, adding that its North American sales were growing strongly.

“Despite misleading claims from competitors, our enterprise customers understand how DJI products provide robust data security. Despite gossip from anonymous sources, DJI is committed to serving the North American market.”

It did not comment on the other U.S. staff departures that current and ex-employees spoke of, although it told Reuters last year its global structure was becoming “unwieldy to manage”.

DJI, which has become a symbol of Chinese innovation since it was founded in 2006, is one of dozens of companies caught in the crossfire of trade and diplomatic hostilities between Washington and Beijing, like Huawei and Bytedance.

Staff sources and competitors say the company’s brand reach, technical know-how, manufacturing might and sales force mean it won’t lose its crown anytime soon in the multi-billion-dollar U.S. and global markets for non-military drones.

But a December order adding the company to the U.S. Commerce Department’s “Entity List” along with the closure of its R&D operation in California could affect its ability to serve the needs of U.S. customers, according to three former senior executives and two competitors.

The Commerce Department listing, enacted over allegations including DJI enabled “high-technology surveillance”, prohibits the company from buying or using U.S. technology or components.

The same month, Romeo Durscher, DJI’s U.S.-based head of public safety, who had played a central role in building the company’s business in providing drone technology to non-military U.S. government departments and agencies, left his job.

Durscher, a former NASA project manager and an influential figure in the drone industry, now works at Swiss company Auterion, a competitor to DJI.

He said he left DJI because he was disheartened by the staff cuts and what he described as internal power struggles between the U.S. team and its China headquarters. He added that the U.S. reorganisation complicated the task in dealing with the fallout from U.S.-China tensions and winning government business.

“It’s not an easy decision to leave the market leader that’s really far ahead of everyone else,” said Durscher, who joined DJI in 2014. “But those internal battles were distracting from the real purpose and in 2020 it got worse … we lost tremendous talent at DJI and that’s very unfortunate.”

U.S. SECURITY CONCERNS

Privately held DJI doesn’t publish sales figures. The U.S. Department of Defense estimated the American non-military market was worth $4.2 billion last year. Consultancy DroneAnalyst said DJI controlled almost 90% of the consumer market in North America and over 70% of the industrial market.

The December listing by the Commerce Department, and the prohibition on buying U.S. parts, may impact the firm’s mobile apps, web servers and some battery and imaging products, said David Benowitz, head of research at DroneAnalyst and a senior figure with DJI’s enterprise team, which works with industrial customers, in Shenzhen before he left last summer.

DJI said in December that the ban would not affect U.S. customers’ ability to buy and use its products.

The listing followed other official blows. In October, the U.S. Department of the Interior said it would only buy drones from companies okayed by the Department of Defense, which last August published a list of five approved drone suppliers to the federal government – four American and one French.

DJI said there was no “broad-based U.S. government ban on purchasing DJI drones”.

“Congress considered that approach last year and rejected it, because … such a ban would be challenging for many companies and government bodies that rely on drones,” it added.

‘WE’RE STILL PRIMITIVE’

Benowitz said persisting U.S.-China tensions and the push by Washington to support DJI’s rivals could see the company’s North American market share decline. He added that, while the federal government comprised a relatively small part of DJI’s business, its restrictions could have a “chilling effect”, with other buyers worried about tougher measures in the future.

“We’re at a point where there are too many market opportunities for one player to dominate,” he said.

Yet he added alternatives to DJI were relative minnows, though both policy support and security concerns over Chinese drones had brought them growth in the last year. Competitors to DJI include France’s Parrot and California-based Skydio.

Chris Roberts, CEO of Parrot Inc, Americas, said 2020 had been a significant year for the company in the United States, having been named an approved supplier by the Defense Department and won business from emergency services and security agencies.

Skydio announced $170 million in D-round funding last week and said it had a valuation of over $1 billion.

“DJI makes good hardware but we are still very early in the market, and very primitive compared to what ultimately should exist,” Skydio CEO Adam Bry told Reuters.

PHANTOM DRONE FLEETS

When Durscher joined DJI back in 2014, the company’s Phantom series was transforming drones from a niche hobby to a mainstream gadget. He said he was particularly drawn by the chance to bring drones into the kit of fire and rescue departments.

He said the technological advances of smaller rivals in the last year were tempting for some public-safety agencies, who might say “let’s go with this drone now so we don’t have to deal with the data security”.

He added that change could come as government departments and companies looked to replace drone fleets that are nearing the end of their life cycles.

A fleet is typically expected to last three to four years, according to Benowitz.

Durscher and several other staff compared DJI’s internal rivalry over projects to “Game of Thrones”, the TV series where rival factions vie for power. He said this resulted in a rotating door of Shenzhen bosses, and that he reported to 12 different managers in his six years at the company.

Durscher’s departure from DJI followed those of other key executives in North America last year, including director of business development Cynthia Huang.

Huang, who now works with Durscher at Auterion, said she became increasingly frustrated because she felt DJI wasn’t able to meet all the growing demands of the enterprise market. Additionally, she said, job cuts over the past year added to the reasons she decided to leave. The losses in Palo Alto, Burbank and New York had followed cuts made to DJI’s global sales and marketing teams, which Reuters reported in August.

“Some of the people that we lost in those layoffs, it didn’t make sense,” said Huang, who was hired in 2018 to take the lead in building DJI’s enterprise business in North America. “The continued exodus of talent was discouraging.”

 

(Reporting by David Kirton; Additional reporting by Jane Lee in San Francisco, Alexandra Alper and David Shephardson in Washington; Editing by Pravin Char)

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Citigroup lawyer says another bank made bigger payment error than Revlon

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NEW YORK (Reuters) – A lawyer for Citigroup Inc told a U.S. judge on Friday he was aware of another large bank that recently made a bigger payment error than Citigroup made last August when it sent $894 million of its own money to Revlon Inc lenders.

Neal Katyal, the lawyer, made the disclosure at a hearing in Manhattan federal court, where Citigroup urged U.S. District Judge Jesse Furman to extend a freeze on $504 million that it has been unable to recoup from the Revlon lenders.

Katyal did not identify the bank, the size of the payment error, or whether the error was fixed.

Citigroup is appealing Furman’s Feb. 16 decision that 10 asset managers, whose clients include Revlon lenders, could keep its mistaken payments.

Furman accepted the asset managers’ argument that Citigroup, as Revlon’s loan agent, paid what they were owed, and they had no reason to think a sophisticated bank would blunder so badly.

Citigroup has said the lenders received a “windfall,” and Furman’s decision could steer banks away from doing wire transfers in a “finders, keepers” marketplace.

Katyal is a partner at Hogan Lovells and former Acting U.S. Solicitor General. Citigroup hired him for its appeal.

 

(Reporting by Jonathan Stempel in New York; editing by Diane Craft)

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Canada aims to raise safety along notorious “Highway of Tears” with cell phone service

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By Moira Warburton

VANCOUVER (Reuters) – Canadian authorities will help fund mobile phone service to increase safety along a remote stretch of highway in British Columbia known as the “Highway of Tears” for the number of women who have gone missing on the route, most of them indigenous.

Indigenous groups recommended the move in 2006 in a report on disappearances and murders of women along the highway between the cities of Prince Rupert and Prince George, roughly 800 km (500 miles) north of Vancouver.

The recommendation was endorsed by a provincial government-mandated commission several years later.

The Royal Canadian Mounted Police are investigating 13 cases of murdered women and five who disappeared on or near the Highway of Tears, although no new cases have been added since 2007. Advocates believe the number of homicides and missing is significantly higher.

Lisa Beare, British Columbia’s minister of citizens’ services, called the project “a critical milestone in helping prevent future tragedies along this route.”

Cell phone plans in Canada are among the most expensive in the world, according to government data, and the cost and lack of coverage in rural areas was a top issue in the last election.

The provincial and federal governments will contribute C$4.5 million towards the C$11.6 million ($9.24 million) cost for Rogers Communications to install 12 cell phone towers, the British Columbia government said on Wednesday.

Lorraine Whitman, president of the Native Women’s Association of Canada, applauded the plan but said it was only one step in making the area safer for indigenous women.

“This truly is a blessing for the women,” she said. “But not all women have a phone. These towers are being put up, but it makes no use to the person that has no cell phone.”

($1 = 1.2558 Canadian dollars)

 

(Reporting by Moira Warburton in Vancouver; Editing by Sonya Hepinstall)

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Canadian fertilizer producer Nutrien to cut greenhouse gas emissions 30% by 2030

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By Rod Nickel and Rithika Krishna

(Reuters) –Canada‘s Nutrien Ltd, the world’s largest fertilizer producer by capacity, said on Thursday it aimed to cut greenhouse gas emissions by at least 30% by 2030, in a plan costing the company up to $700 million.

Agricultural companies, including Mosaic and Corteva, have set carbon emissions targets as climate-conscious investors push firms to become more environmentally friendly.

Nutrien plans to spend $500 million to $700 million to meet the carbon emissions target, which includes cutting emissions from nitrogen production by 1 million tonnes of carbon dioxide equivalent annually by the end of 2023.

“We’re in a really unique spot to address two big societal challenges – food security, and in a way that reduces our environmental footprint,” said Mark Thompson, Nutrien’s chief corporate development and strategy officer, in an interview.

Synthetic fertilizers account for 12% of global emissions from agriculture, according to a 2016 United Nations Food and Agriculture Organization report.

Nutrien’s target includes Scope 1 and 2 emissions, which reflect direct operations and electricity use. Nutrien is addressing Scope 3 emissions – those related to on-farm activity – with a program that encourages growers to adopt sustainable practices that generate monetary credits.

The Saskatoon, Saskatchewan-based company plans to deploy wind and solar energy at four potash plants by the end of 2025, replacing electricity generated by coal and natural gas.

It also plans to expand its sequestration of carbon emissions from nitrogen fertilizer production and to invest in technology to capture nitrous oxide gas from its facilities.

Nutrien estimates that its carbon credit program could directly amount to $10 to $20 per acre for farmers, and it expects to benefit financially itself as well.

“If we can provide agronomic value and the value of the carbon credit over time, we’ll have customer loyalty – we anticipate that we’ll be a preferred supplier,” Thompson said.

(Reporting by Rithika Krishna in Bengaluru and Rod Nickel in Winnipeg; Editing by Sriraj Kalluvila and Steve Orlofsky)

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