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: California Threw A Wrench In Volkswagen’s 3.0-Liter Recall Plan
The California Air and Resources Board rejected VW’s plan for fixing the 3.0-liter diesel engines found in Volkswagens, Audis and Porsches. The fix, which includes a new catalytic converter, was declared “inadequate,” reports Bloomberg. This means that VW might have to resort to a buyback of the affected vehicles:
A buyback of cars with 3.0-liter engines would mean repurchasing luxury vehicles such as Audi’s top-of-the line A8 sedan and Q7 sport utility vehicle as well as Porsche Cayenne SUVs. That could add another $2 billion to $3 billion to Volkswagen’s costs related to the cheating in the U.S., said Juergen Pieper, a Frankfurt-based analyst at Bankhaus Metzler. The rejection shows the scandal that emerged in September is far from over, despite last month’s landmark $14.7 billion settlement covering 480,000 cars with 2.0-liter engines.
That’s about 85,000 cars. Ouch.
2nd Gear: Hyundai Workers Are Going On Strike Again
Hyundai Motor’s South Korean unionized workers voted to go on strike again, making this a repeat event for the fifth year in a row. After wage talks broke down, 77 percent of the carmaker’s 48,806 unionized workers approved the strike, and will stage a partial strike for four days next week, Reuters reports.
The union’s demands this year were:
A 7.2 percent rise in the basic monthly wage and performance pay totaling 30 percent of the automaker’s 2015 net profit.
Other demands include giving employees the right to refuse to be promoted so that they can maintain their union membership.
The company is pushing to freeze wages, revamp the wage structure and expand the so-called “peak-wage system,” the union said.
A lengthy strike could harm car sales further, as Hyundai is already facing a sales slowdown.
3rd Gear: General Motors Knew About Defective Switches In 2009
The 2nd U.S. Circuit Court of Appeals in Manhattan ruled that General Motors knew about the defective ignition switches when the company entered bankruptcy back in 2009. “By failing to disclose the problems,” said The New York Times, “GM prevented crash victims from making claims or contesting the bankruptcy provisions, robbing them of due process, the court ruled.”
Because previous court rulings have said that GM is not legally responsible for anything that happened pre-bankruptcy, present-day GM is technically an entirely new company. ‘Old GM’ sold all of its assets to ‘new GM’ and left the debt behind.
This new ruling basically overturned most of that decision and let hundreds of pre-bankruptcy claims to proceed. According to The New York Times:
Steve Berman, a lead attorney in the loss-of-value cases, said the appeals court ruled the bankruptcy order doesn’t protect New GM from claims that it misrepresented the safety of cars made by pre-bankruptcy GM. The appeals judges, he said, determined that Old GM knew that the cars could stall and air bags wouldn’t work but didn’t reveal those facts during the bankruptcy.
“At minimum, Old GM knew about moving stalls and air bag non-deployments in certain models and should have revealed those facts in bankruptcy,” the court said. “If a debtor does not reveal claims that it is aware of, then bankruptcy law cannot protect it.”
This could expose the Detroit giant to billions of dollars in additional liabilities.
4th Gear: Porsche’s Sharing Its New V8 Engine With Bentley And Audi
Porsche’s new 4.0-liter twin-turbo V8, which will debut in the Panamera Turbo, will also be seen in the revamped Audi A8 and the Bentley Mulsanne. That means the two cars, due next year, will be built in Stuttgart, says Automotive News.
5th Gear: Differing Safety Regulations In U.S. And EU Cost Carmakers $2.6 Billion
Carmakers on both sides of the Atlantic are calling for a common standard of safety requirements for the cars they sell to the respective markets.
A study conducted by the Center for Automotive Research and commissioned by the Alliance of Automobile Manufacturers found that between 116 “vehicle variant groups” that sold models in the U.S. and the EU incurred “$1.68 billion to $2.26 billion in incremental costs from the differing safety regulations in 2014,” reported Automotive News. That’s a higher cost than the $1.6 billion in tariffs applied to U.S.-to-EU auto trade that year.
There needs to be a solution to this:
The costs stem from the vehicle design and equipment modifications necessary for European-market vehicles to comply with U.S. standards, and vice versa. For example, automakers “almost universally” use larger airbags in North American-market vehicles because of unbelted crash tests conducted here, which European regulations do not require.
Automakers are pushing negotiators to agree to so-called mutual recognition of safety standards, which would allow an EU-compliant vehicle to be sold in the U.S. market without modifications, and vice versa. Removing the non-tariff trade barriers could also enable automakers to offer more models for sale in each market, according to the study.
Hey, that could mean that the cool stuff they get over in Europe might actually come here after all!
Raymond Loewy, the hugely influential industrial designer who put his mark on the American automobile industry with groundbreaking vehicles such as the Studebaker Champion, Starliner and Avanti, dies on this day in 1986 at his home in Monte Carlo at the age of 92.
Neutral: What’s another option instead of a buyback?
Buying back those expensive cars won’t be easy or cheap. Is there another way around this?