Good morning! Welcome to The Morning Shift, your roundup of the auto news you crave, all in one place every weekday morning. Here are the important stories you need to know.
1st Gear: Ford Tells Trump Fuel Economy Standards Put 1 Million Jobs At Risk
Ford’s CEO Mark Fields told President Donald Trump that one million jobs are in jeopardy thanks to fuel economy standards that don’t “align to market reality,” Bloomberg reports.
Fields, along with GM’s Mary Barra and Fiat Chrysler’s Sergio Marchionne, did not ask to have the standards removed in their meeting with President Trump last week, the report said. Instead, Fields said they told Trump they want regulations combined into a single standard, and they want them to consider the kinds of cars people actually want to buy:
We think having one national standard on fuel economy is really important...[1 million jobs] could be at risk if we’re not given some level of flexibility on that — aligning it to market reality. So that really resonated.
President Trump has already discussed the idea of repealing fuel efficiency standards, and this exchange with Mark Fields about job loss is only going to push the president further down that road.
On the other hand, we’ve had fuel economy standards for decades now, and the loss of American manufacturing jobs is almost entirely attributable to other economic forces.
2nd Gear: The Dealers Are Also Pushing For Relaxed Standards
But it’s not just the heads of the major auto companies nudging Trump for relaxed fuel economy and emissions standards; the National Automobile Dealers Association — a group with a very strong lobbying presence in Washington— ended its convention last week, during which dealers called upon the President to relax fuel economy and emissions standards, Reuters reports.
Chairman of the association and owner of a string of GM dealerships in Illinois, Mark Scarpelli, told the new site that the tech automakers have to put in cars to meet the regulations add $1,500 to $3,000 to the base price. He went on, saying:
You inflate the price of the vehicle and a car that was maybe within reach of being affordable now may not be.
Scarpelli suggested that changing the “phase-in period,” might be a good measure to help loosen the regulations. Sidney DeBoer, founder of dealership network Lithia Motors, went on saying:
We need to lighten the load because the government is trying to force manufacturers to make cars people don’t even want.
Which is absurd, as when you’re offered two identical cars, one of which gets good fuel economy, and one which gets poor fuel economy, you’d choose the better car every time.
So now we’ve got dealerships and major auto executives asking Trump for relief, and on the other side, we’ve got the EPA remaining adamant about keeping these standards.
The dealers, whom we know for certain love to use scare tactics to enrich themselves at the expense of consumers, will win.
3rd Gear: Japan’s Prime Minister Counters Trump’s “Unfair Trade” Claims
Bloomberg reports that Prime Minister of Japan Shinzo Abe responded to Donald Trump’s allegations that America’s trade imbalance with Japan is “unfair,” suggesting that it’s not the Japanese government causing poor U.S. auto sales in Japan, it’s lack of effort by U.S. automakers.
Donald Trump voiced his disdain that Japanese cars sell so well in the U.S., while American car sales in Japan are downright pathetic (Bloomberg notes that Japan exported 1.6 million cars to the U.S. in 2015, while fewer than 19,000 American cars made it to Japan’s shores).
The Prime Minister argues that this imbalance has nothing to do with tariffs, as there are none in place, and everything to do with American automakers simply not trying hard enough, saying:
...if you go outside, you will realize that there are quite a lot of European cars, but no American cars and there are reasons for that. There are no dealers, they don’t exhibit at the Tokyo Motor Show and they don’t advertise on the television or in newspapers...Makers from some countries make an effort by switching the steering wheel to the other side
As we can tell you from our own personal experience, Abe is right.
The Japanese leader, who has previously said he’s open to the idea of a bilateral trade agreement with the U.S., will to speak with Trump on February 10th.
4th Gear: The Suppliers Will Be The Ones Getting Screwed By A Tariff
Last week, we looked at all the U.S.-market cars built in Mexico, and how much their base prices will rise with Trump’s 20 percent tariff threat. But those cars aren’t the only ones potentially getting more expensive; those built stateside could also cost a prettier penny, and that’s because a major part of the U.S. auto supply-base manufactures its components in Mexico.
Detroit Free Press writes that, despite Trump’s concentration on meeting with automakers on the issue, it’s really auto suppliers who stand to take the biggest hit from NAFTA renegotiations, which might include a tariff or a levy against those who move jobs to Mexico. That’s because, as the news site points out, most automotive jobs in Mexico deal with parts, and not entire vehicles:
...the vast majority of auto-related jobs in Mexico are concentrated in making parts, not assembling cars and trucks themselves. The rule of thumb is about six to seven auto parts workers for every auto assembly plant employee.
University of Michigan professor and former economist for GM says the auto industry shared between the three nations of NAFTA is complex, and could take a major hit if Trump decides to impose a tariff:
With respect to Mexico, and particularly with respect to the auto industry, where the three countries involved with NAFTA, the whole process of automobile production is now so intertwined, that to try to untangle that would be a terrible blow to the industry
Trump should be inviting Tier 1 suppliers to the White House, not just execs from the Big Three.
5th Gear: Volkswagen Is Back On Top, Somehow
Despite the Dieselgate scandal that has marred the company’s image, Volkswagen has surpassed Toyota as the best-selling automaker in the world, due in large part to sales in China, the Detroit Free Press reports.
The site says VW Sold 10.31 million cars in 2016, compared to Toyota’s 10.18 million, and a big part is due to the fact that VW is the biggest seller of new vehicles in China, moving 3.98 million of them in 2016— a 12.2 percent increase from the previous year. This year, Detroit Free Press predicts, China could end up being VW’s largest market.
So yes, U.S. sales are dropping, but VW’s got its sights on another strong market.
Reverse: Mazda Is Born
On this day in 1920, Jujiro Matsuda (1875-1952) forms Toyo Cork Kogyo, a business that makes cork, in Hiroshima, Japan; just over a decade later the company produces its first automobile and eventually changes its name to Mazda.
Neutral: Do you think fuel economy and emissions standards should be tweaked to match market demand, or should they be entirely independent?