I don’t have a good photo of First Brands founder Patrick James, mostly because he allegedly doesn’t like to get his photo taken. That’s understandable, but it’s far from the worst thing he’s been accused of doing. A new lawsuit by his former company suggests James pilfered at least $700 million, although the amount unaccounted for is more than $1 billion.
When The Morning Dump talks about billions of dollars, it rarely involves individuals. It’s usually companies, like Ferrari, that saw earnings rise in spite of weaker sales in China and tariffs. Both are weighing heavily on Ford CEO Jim Farley, who explained the difference between the threat of China now and the threat of Japan back in the day.
Bentley is calling its newest car the world’s first “Luxury Urban SUV.” Is that true?
The Patrick James Movie Will Be Interesting
When I was at SEMA a couple of years ago, I was impressed by how many different well-known auto parts companies were suddenly under a single company known as First Brands. Some of these are merely licensing deals (First Brands Group doesn’t own Michelin, but it does make Michelin-branded wiper blades under license), but the company has quickly and quietly collected a ton of companies, including FRAM, Trico, and Raybestos.
Thomas wrote about this in September, but the company had to file for Chapter 11 after it was discovered that the company had giant liabilities that dwarfed the company’s assets. More is coming out, including a lawsuit from the company itself, via Bloomberg, which makes this jaw-dropping claim:
Lawyers for the company — now run by restructuring consultants at Alvarez & Marsal — alleged that James borrowed funds on fraudulent terms, only then to “routinely and regularly” divert cash for himself and his family, according to a Southern District of Texas filing dated Nov. 3. More than $700 million was funneled from First Brands directly to James and his affiliated entities from 2018 to 2025, they claimed.
James “secretly pilfered some of the Company’s assets to fund his and his family’s lavish lifestyle. In short, he lined his pockets at the expense of First Brands and its creditors,” according to the document. The plaintiffs drew on data from more than seven million documents, as well as bank records and a collection of devices from employees.
In the 35-page document, lawyers paint a picture of James’ luxuriant spending habits, pointing to a fleet of at least 17 “exotic cars” and a celebrity personal trainer. In some cases, payments to James and his family were made directly from First Brands accounts, including at least $3 million in rent paid over 2019 to 2024 for a New York townhouse and about $500,000 paid to a private chef in 2025.
That’s a lot, but even $700 million isn’t the total amount that’s unaccounted for in the bankruptcy. First Brand Groups utilized the private credit market to borrow, and allegedly asked for delayed payments from customers, then turned around and used those invoices as a way to borrow more money to buy more companies, and, well, it didn’t work out.
The Wall Street Journal had a big piece on this, and it gets a bit into how the somewhat reclusive James built his empire:
First Brands would often provide products to customers on delayed-payment terms, and then pledge the accounts receivables to outside investors that provided the company with financing. The extent of these arrangements, which wasn’t disclosed until the bankruptcy, grew over time into several billion dollars of off-balance-sheet debt.
Over the years, several business partners sued James over his financing arrangements, alleging misleading and fraudulent practices.
A 2009 lawsuit filed by a creditor alleged that James made representations and omissions that gave a “false understanding of those companies’ financial strength and the value of the collateral securing the loans.” In a court filing, James’s lawyer said “any supposedly fraudulent activities conducted by James, which James denies, were undertaken with the full knowledge and consent of Plaintiff.” James later settled the case, and the terms weren’t disclosed.
The companies are still operating under Chapter 11 rules, so there’s no immediate concern about a run on air filters.
Ferrari Is Still Doing Fine, Thank You Very Much
I mentioned last month that Ferrari has made itself somewhat immune to the whims of the market by rebuilding itself as a luxury and sports brand. The company’s Q3 filings seem to support this, per Reuters:
Luxury sports-car maker Ferrari said on Tuesday its core earnings rose 5% in the third quarter, above expectations, thanks to a strong pricing power supported by models such as the SF90 XX and 12Cilindri, as well as increased personalisations.
The Italian company said its earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to 670 million euros ($781 million) in the July-September period, topping an analysts’ consensus of 649 million euros in a Reuters poll.
Must be nice.
Ford CEO Explains The Difference Between China And Japan
Ford CEO Jim Farley sat down with CBS Sunday Morning (link here), and I missed it, but this quote that the Detroit Free Press pulled is interesting:
During the interview, the topic of Japan’s domination of the U.S. auto market in the 1980s came up as a comparison to the threat of China’s EVs coming to the U.S. It’s a topic Farley is not shy to address, but this time he gave a new warning beyond his past comments, characterizing Chinese cars as an “existential threat.”
“They have enough capacity in China with existing factories to serve the entire North America market, put us all out of business,” Farley said on the show. “Japan never had that so this is a completely different level of risk for our industry.”
I think that’s a good point. A mixture of protectionist policies, like the Chicken Tax, and Japan’s lack of a centrally planned economy meant it was never in an immediate position to swamp the United States in the same way.
Behold, The Luxury Urban SUV
Bentley already teased its smaller electric SUV when it showed the rather attractive and pleasingly weird Bentley EXP 15 concept. Now Bentley has come out and announced more details:
Streamed live from the Bentley Motors factory in Crewe, and the future production line of its next all-new car, the world’s first Luxury Urban SUV, Chairman and CEO, Dr. Frank-Steffen Walliser, alongside members of the Bentley board will give a special presentation on Wednesday 5 November at 16:30 GMT. The online briefing, five years to the day of Bentley’s first Beyond100 strategic announcement, promises to include further details of Bentley’s first fully-electrified product along with further strategic updates including a limited production new model coming this year.
Huh.
What I’m Listening To While Writing TMD
Hey, it’s Robert Earl Keen doing “Feelin’ Good Again” live. That’s not a bad way to start the day.
The Big Question
What’s a good example of a Luxury Urban SUV? This feels like a thing that exists.
Top photo:
Can we phinally start taxing the phreaking rich corporations please? It blows me away that corporations can shift around money and debt and leverage things in their favor but when the house of cards falls, the working class bails them out and the CEOs get golden payouts. This guy spent 100x my annual salary in one year for a personal chef?! He should be grilled while in jail, perhaps they will serve fava beans with a nice Chianti.
Is it just me or does Farley seem too simple to run a large company?
Luxury urban SUV = the Escalade, a favourite of “urban music” (I.e. hip hop and r&b) moguls.
Bloomberg should know that luxuriant means “rich of or as foliage,” which is not the same as luxurious.
Thank you. Itch, scratched.
Nope
The Cayenne can go anywhere, man.
…except my garage, apparently. :'(
Just 4 years ago I worked at a viable company, maybe not thriving but certainly holding its own with around 150 employees, and then the board hired A&M to help us “restructure”. We ended up with the worst CEO you can imagine. Seriously, whatever you’re imagining right now this guy was way worse. In fact, that CEO was the lead “consultant” from A&M. Today we’re essentially out of business, a couple of our brands have been sold to another company and there are less than 30 of us left. A&M got their money though.
Sounds very similar to the “restructuring” my then-employer went through 10 years ago. The new CEO from the restructuring firm, after stating the old CEO was overpaid, proceeded to state he was only going to take a salary of [$xx,xxx] per week. That number just happened to be 1/52 of the old CEO’s annual pay, aka no difference.
I was let go a decade ago this month, and the company was gone (after passing all of its assets through the restructuring firm on the way to the shareholders) in another six months.
This one made no promises about saving money. He took almost 7 figures his first year and fired all of our existing executives replacing them with folks that cost twice as much but couldn’t do 1/5 of the work of the people the replaced. He crashed us into that iceberg and backed the ship up and just kept repeatedly crashing into it for 2 solid years before the board finally saw through his BS.
Wait a minute, I’m sure this news is not trying to deflect from the other First Brands news released recently: That the company has been buying and lease back billions of dollars of inventory, primarily windshield wipers weirdly enough. To justify Collateralized Loan Obligations against its own supply chain. From non-banking lenders. And the entire company had six billion in debt entirely off balance sheet. And numerous people in the company involved have been doing what one would call fraud. And now the IMF is sniffing around private lending, because it might be a bit too easy to defraud private lenders, and do some high stakes gambling with someone else’s money. And that a concerning amount of our economy may just be gambling with private money. Hoping to grow the company and sell before creditors come calling. Which is eerily similar naivety and systematic fraud that preluded **drumroll please** 2009 mortgage crisis!
Just one bad actor, nothing to see here folks.
Yup
Luxury SUV my mind immediately goes to Lexus GX. But for urban maybe an Lexus RX. Luxury and premium are always is a moving target so it’s hard to say what’s what. Luxury especially being used for many schemes. Now we hear “quiet luxury”. The reality is most people with real money don’t scream about it and don’t spend on what marketers claim they should be spending on.
In China it used to be Porsche Macans in every well to do city along with a good amount of Q5s. I see whole fleets of Audi Q5s in urban us parking lots now. Maybe the Q7 et al is more luxury with the urus and Bentayga.
If you think luxury never goes out of style and should last then maybe a g wagon. With all those companies rebuilding vintage mercs to order there must be enough demand. Most people don’t look at pre 1997 Merc in decent condition and think it’s a cheap car. I’m not sure even vintage rolls or Bentleys have that distinction.
True luxury SUVs are all “urban”. If you’re traveling any real distance you’ll at least want to take the helicopter, dahling.
In the automotive world, people named Patrick and have a first-name-as-surname seem to have run-ins with the law. See: a certain Patrick G, formerly of that old German lighting site.
At least he isn’t a Carlos.
I always say, “Never trust anyone with a first name for a surname.”
Poor Patrick Stewart.
Or Patrick Henry.
But we can trust David Tracy!
Starting in the mid-1970s, all manner of American CEO were in a huge damn hurry to shift production of all manner of formerly American-made products to China. The Chinese got so good at building these products that they eventually got wise and cut out the American middleman. The automobile industry is the final holdout in this process, and the American automobile industry will collapse at some point.
Be careful what you ask for, you might get it.
Also hilarious how American companies should, of course, be allowed to grow as large as possible and to have a presence in every single country under the sun, but heaven forfend a company from another country tries to do the same thing.
And prior to China, South Korea. And before that, Japan.
Now they’re mad because they outsourced to a much, much larger country that will eat their lunch.
Great music choice today!! My kids and I have lately really been enjoying his Live Dinner Reunion double album.
+1 here. That album kicks butt.
I feel a little like a Bad Parent when me and my 13-year-old are singing along to Corpus Christi Bay together and he knows every lyric about alcoholism and drug use. But only a little