Trump’s trade threats are further screwing with the auto industry, camera-based “mirrors” could be coming to the U.S. (finally), drivers don’t like being told by their cars they suck at driving, and something about Suzuki, which still exists. All this and more in The Morning Shift for Wednesday, August 28, 2019.
1st Gear: Forcing Businesses To Leave World’s Largest Market Would Be Bad For Business, Analysts Conclude
As you may be aware if you haven’t spent the last week under a rock with your fingers in your ears, President Trump wants to order U.S. companies to leave China and believes he can legally do so. Hooray for the party of small government!
We are not going to get into whether that is something he can actually do, which is a debate unto itself. But what we are going to get into is what such a move would potentially mean for U.S. automakers.
As you can probably guess, it would be bad, particularly for GM. From the Detroit Free Press:
“The number one loss to GM, if forced to leave China, is the loss of all the future growth potential,” said Jon Gabrielsen, a market analyst who advises automakers and suppliers. “Since they already sold off their European operations ... GM would essentially be almost only a North American company.”
The problem with that is that North America doesn’t have growth capacity. China, already the world’s largest auto market with a burgeoning middle class, does.
As the article goes on to detail, GM has more or less built its entire growth strategy around China. Another analyst called a China pullout “unthinkable” for GM. Consider that since 2012, GM has sold more cars in China (3.6 million vehicles) than it has in the U.S. (2.9 million) or North America in general (3.5 million).
We are very, very far from any China exodus becoming a reality—at the very least, mega-corporations like GM would almost surely use every legal maneuver in the book to tie up such an executive order in the courts until the next election—but it sure would be a hell of a thing for the U.S. government to have spent $50 billion to bail out GM only to try and completely kneecap it a decade later.
As we have noted many times in The Morning Shift, the UAW is currently in negotiations with the Big Three over the next four-year contract. These negotiations are widely expected to be contentious and ugly. Another thing that is currently happening is Trump flip-flopping on trade policy every few days (see: 1st Gear).
The latter fact makes the former negotiations especially tricky. It makes it harder for automakers to know precisely what they want because they don’t know what the rules of the game will be. That same uncertainty makes it even more paramount for the UAW to get as much protection for workers as possible. It hardly takes an expert to know those two goals (flexibility vs. contractual obligations) are opposites.
This was all detailed in a Detroit Free Press article:
“The overall interaction of trade, fuel economy and the economy overall, plus the demand for vehicles over the next four years, makes for a very difficult environment to negotiate an agreement,” said Kristin Dziczek, vice president of the Center for Automotive Research.
She expects the negotiations to be contentious, complicated by plant closings and an imminent shift to electric and self-driving cars that could radically shift production as the union knows it.
Dziczek said the UAW’s rank-and-file is likely to want as many things guaranteed as possible in the next labor contract, while carmakers are likely to push for flexibility in light of the fluid trade environment.
“If things turn south, (the companies) don’t want to be locked into guaranteed wages,” she said. “Based on the same set of facts, the negotiators can have different motivations.”
This dynamic is hardly unique to automakers, but it’s particularly important how the current administration’s trade policy affects automakers. They are, after all, not only some of the biggest companies affected by this uncertainty in the middle of labor negotiations, but auto industry labor will also be a key constituency in swing states both parties desperately want on their side in 2020.
There is only one car I want and it is the Honda e. But I cannot have the Honda e, because I live in the U.S. and we only get big, impractical, heavy cars. Also, the Honda e uses cameras for side mirrors, which are not legal in the U.S.
For now! From Reuters:
The U.S. National Highway Traffic Safety Administration plans to test how drivers could use cameras to replace traditional rearview mirrors in automobiles, a technology already allowed in other countries, the agency said on Tuesday.
The planned test by the agency known as NHTSA would examine “driving behavior and lane change maneuver execution” in cars with traditional mirrors and camera-based visibility systems, the department said in a notice offering the public a chance to comment.
So you’re telling me there’s a chance?!
Side cameras are already legal in Europe and Japan, so I see no reason why they can’t be here. Of course, merely making side cameras legal probably won’t mean the Honda e will come to the U.S. After all, we’re a nation of impractical over-consumption. But a man can dream.
4th Gear: Survey Finds Many Drivers Are Annoyed By Car Technology That Points Out How Bad At Driving They Are
Most people are bad drivers, or at the very least occasionally engage in bad driving behavior. Increasingly, cars are equipped with technology like lane keep assist or automatic emergency braking that somewhat compensate for these human errors. And drivers find those alerts annoying, according to the Free Press:
The 2019 J.D. Power Tech Experience Index study also found that frustrated drivers may avoid the systems in future vehicle purchases. That’s a problem for automakers who want to sell the technology and prepare people for fully automated vehicles, the company said.
“Automakers are spending lots of money on advanced technology development, but the constant alerts can confuse and frustrate drivers,” said Kristin Kolodge, J.D. Power’s executive director of driver interaction and human-machine interface. “The technology can’t come across as a nagging parent. No one wants to be constantly told they aren’t driving correctly.”
For example, systems that keep vehicles centered or within their lanes were problematic for owners, the study found. An average of 23% of drivers with the systems view the alerts as annoying. The results vary by brand, with up to 30% finding the alerts bothersome. Of drivers who don’t like the alerts, 61% sometimes disable the systems. A spokesman said J.D. Power would not identify the brands.
Joking about bad drivers aside, one of the reasons people may find these systems annoying is they have their flaws. I, for one, found Nissan’s lane keep assist technology infuriating when I was on a 10-mile stretch of highway where the lanes had been shifted with cones for repaving and the car kept screeching at me WHY ARE YOU NOT BETWEEN THE LINES and I had to disable the system entirely because it kept trying to steer me into the cones and the construction workers on the other side of them.
People tend to remember the times these systems don’t work rather than the times they do—AEB saved me from a pretty vicious rear-ending in the Brooklyn-Battery Tunnel—so when a survey asks if you find them annoying, it’s easy to recall the instances they annoyed you rather than the times they saved you.
In this week’s edition of Automaker Partnerships, **spins wheel** Toyota has joined forces with **spins wheel** Suzuki. From Reuters:
Toyota will pay around 96 billion yen ($910 million) for a 4.94% stake in Suzuki, while Suzuki will acquire in the market around 48 billion yen worth of shares in Toyota. That is equivalent to 0.2% of Toyota’s shares as of Wednesday’s closing price, before the announcement.
The companies said in a joint statement they intended to overcome challenges facing the industry by “building and deepening cooperative relationships in new fields while continuing to be competitors”. They said they would strengthen technologies and products in which each of them specialize in.
We need to come up with a new word for these arrangements. Partnerpetitors? Something like that, but better.
It’s a late August Wednesday and we’ve talked about the trade war enough, so let’s go with a more fun question. As I said above, I’m all about that Honda e. What about you?