Good morning! Welcome to The Morning Shift, your roundup of the auto news you crave, all in one place every weekday morning, just in time for you to sound important in all your friends’ group chat. Here are the important stories you need to know.
1st Gear: Dieselgate Comes For Porsche
Joerg Kerner, Porsche’s head of powertrain development, was close to ex-VW CEO Matthias Mueller and top engineer at VW Group Wolfgang Hatz, who has since been arrested, as Automotive News Europe reports. Now the German police have come for Kerner, arresting him in another sweep of Dieselgate, the emissions control scandal that doesn’t stop giving, per ANE:
German daily Bild am Sonntag, citing an internal memo from Porsche CEO Oliver Blume to employees, said a manager had been arrested.
Earlier this week German prosecutors searched around 10 premises in Bavaria and Baden-Wuerttemberg as part of inquiries into emissions manipulations.
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Kerner, who is now in custody, joined Audi from Robert Bosch in 2004. He built Audi’s engine and transmission electronics design, software and functional development division. Audi has been accused of first developing the software that enabled VW to rig up to 11 million diesel engines to hide high emissions.
I figure that VW employees will stop getting arrested over Dieselgate sometime after internal combustion engines are made completely obsolete by solar power or something.
2nd Gear: China Is Ending One Of Its Weirdest Restrictions On Foreign Carmakers
Ever since 1994, foreign car companies have been restricted on how independent they can be in the Chinese market, not being allowed to own more than 50 percent of a domestic Chinese automaker. But now that’s going away and foreign car companies will be (slowly) able to exert much more control in China, as Automotive News China reports:
The country will remove limits on companies making electric and plug-in hybrid vehicles in 2018, commercial-vehicle producers in 2020 and the wider passenger vehicle market by 2022, China’s state planner said in a statement.
The move, which comes amid a trade standoff between Washington and Beijing, signals the end of a rule put in place in 1994 in the world’s largest auto market that limited foreign automakers to a 50 percent share of any local venture.
The policy was implemented to help support domestic carmakers compete against more advance international rivals.
For what it’s worth, an unnamed GM representative said the company wouldn’t leave its joint venture with its domestic Chinese partner SAIC even if it could, but who knows how seriously to take that.
3rd Gear: Geely Boss May Start Pressuring Daimler For Volvo Tie-Ups
This is a weird one, and slightly confusing to explain. China’s Geely owns Volvo and the guy who owns Geely just became the biggest shareholder in Daimler, recently buying a 9.7 percent stake. Now people are starting to think that he’s going to start pressuring technical tie-ups between Mercedes-Benz and Volvo, as he’s been talking up the importance of partnerships and conglomeration, as Auto News China reports:
The guessing game on Li Shufu’s intentions after buying the biggest stake in Daimler is up: Automakers must cooperate, or risk being swallowed up.
That’s the takeaway from an editorial written by the owner of China’s biggest non-state carmaker in Frankfurter Allgemeine Zeitung. Li, who in February bought a 9.7 percent stake in Daimler AG to add to his ownership of Volvo Car Group, said traditional carmakers need to “wake up” to make the switch to a business model based more on sharing technology to generate acceptable returns in future.
“Those companies sticking to silos will be swallowed up by the few remaining giants,” Li said. “Those who’ll bundle their shared strengths will win out in the future.”
Now everybody’s wondering if it’s only a matter of time before we start seeing Benz engines in Volvos, though I myself remain on the skeptical side. The guy might just like to talk.
4th Gear: South Korea Offers GM $470 Million Not To Leave The Country
Things are not looking great for GM Korea, the entity which exists because the old boss (back when it was Daewoo) ran off with tens of billions. Bankruptcy seems imminent as GM is in the midst of talks over wages, talks that are not going well, per Reuters. It was at this point that the government stepped in to sweeten the deal, as the Financial Times reports:
The South Korean government has offered Won 500bn ($470m) to GM to keep the US auto group in the country, as it hits its Friday deadline for deciding whether to wind down its Korean operations.
However, the US car group remains pessimistic about its prospects in the country, saying it still needs more concessions from workers.
It’d be easy for me to blame this all on small cars not selling well thanks to cheap gas, but I fear that’s giving GM too much credit. In any case, I wish this had all gone better and also I wish that the Aveo would burn in hell.
5th Gear: Galaxy Brain: Small Car Sales Aren’t Bad Now, They Were Always Bad
My favorite take today comes from the Detroit News, which argues that though small car sales are indeed dropping as gas remains cheap, this is actually normal, as small car sales in America are historically bad. Here’s the meat of the take:
[I]ndustry executives and analysts say the small car market is actually returning to historical norms after an unusual period when manufacturers expanded small car lineups in anticipation of rising demand fueled by rising gas prices. Those have since eased — and are expected to stay that way.
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“This has never been a good market for super-small cars,” says veteran Kelley Blue Book auto analyst Karl Brauer. “Gas prices and a sluggish economy helped bring cars like the Smart ForTwo and Fiat 500 to market in the last decade, but now prices have returned to their historic lows in this country.”
The Detroit News goes on to cite VW’s American small car boss who said that “Small cars look weird here in the U.S. next to big SUVs,” which is my new favorite cop out.
Bring on more SUVs and trucks, the only righteous and natural choice for America’s biggest and beefiest auto-buyers. Don’t blame carmakers. This is ordained from above.
Reverse: It’s Not Just Weed Day; Other Things Have Happened On 4/20
Neutral: Do You Think There Is Ever Hope For Small Cars In America?
I do, but I also think gas is going to get expensive as hell in not too long.