Updates on the UAW vs. GM strike battle, who’s going electric, and bad news for European auto sales. All this and more in The Morning Shift for Wednesday, September 18, 2019.
1st: GM Caves On Health Care As Striking Workers Go Without It
The UAW vs. GM battle has been raging this week as the UAW’s negotiations for better pay, benefits, paths to seniority, and more have come due at the expiration of a labor contract. GM has been holding firm despite striking workers in 33 plants across nine states. But last night, it made its first concession: health care.
At the same time, last night GM stopped paying its workers’ health care. Instead, the brunt of health care cost was shifted to the UAW union fund.
Then, mere hours later, GM made major health care concessions during contract negotiations. From Bloomberg:
Health care has long been considered the third rail of automotive contract talks, with workers zealously clinging to their plans. They see them as hard-won benefits that help make up for the wage concessions and jobs given up over a decade ago when GM and Chrysler went bankrupt and Ford went through wrenching restructuring.
The three companies’ hourly employees contribute between 3% and 4% to their coverage, compared with 29% for the average American worker, according to a October 2018 study by the Kaiser Family Foundation.
GM tried to play hardball. Instead of that four percent contribution, GM wanted its employees to up their contribution to fifteen percent—still lower than the national average, but a huge leap for people who aren’t used to dedicating that much of their wages to coverage.
Medical benefits are incredibly important here, for both GM and the UAW, and it’s obvious that GM thought health care could be used as a bargaining chip in the ongoing negotiations. Think about how many people out there have built their lives and their budgets around the benefits provided by their jobs—and then imagine a significant portion of that budget suddenly had to be allocated somewhere else.
From Reuters:
GM has said in the past that it annually spends about $1 billion a year on healthcare coverage for its hourly workers, suggesting the monthly cost per worker is in the range of $1,700 to $2,000. The UAW on its website said its strike fund covers certain benefits such as medical and prescription drugs, but not dental, vision and hearing.
The fact that GM has caved suggests that the current health care benefits will remain in place, Bloomberg theorizes.
However, strikers are now on day two without healthcare.
2nd: GM Pledges To Go Electric
As part of the contract negotiations with the UAW, GM has pledged to invest $7 billion in the US automotive industry. As it turns out, a significant portion of that money may just go to the production of electric vehicles and batteries, Automotive News reports.
There’s plenty to suggest that EV investments may be the perfect way to go. From the article:
GM plans to begin building at least five new electric vehicles in the United States by 2023: two for Cadillac, one for Buick and two for Chevrolet, including a replacement for the Bolt EV. Sources said all of those vehicles are likely to be assembled at GM’s Orion Township plant north of Detroit.
Five new vehicles in less than five years is pretty significant, especially when you consider that EV production is a different beast when compared to ICE production. GM has also confirmed that investments would be allocated to eight facilities in four states. There weren’t many specific details given, but GM was able to confirm that two of those facilities would include an electric pickup and a battery cell plant.
At this moment, we can really only speculate on how much of that seven billion will end up being funneled into EV production—but it’s a promising start.
3rd: Toyota Invests In Texan Pickup Production
Toyota wants production of its Tacoma and full-size Tundra pickups to get more efficient. And what better way to do that than to invest $391 million in a pickup plant in the heart of pickup country: San Antonio, Texas?
While the current round of Tacomas and Tundras are manufactured in Texas, they share different platforms. That makes it a lot more complex to manufacture a bunch of pickups because they don’t share significant base similarities. Even though both models can be produced on the same assembly line, there’s still enough differences to make it a pain in the ass to put them together with similar speed.
Toyota, though, plans to begin manufacturing the next generation of its pickups on the same platform, thus smoothing out the production process, Automotive News reports.
From the article:
In July, Bexar County commissioners approved a request from the automaker for a 10-year, 80 percent tax abatement for the proposed investment in the 16-year-old Toyota Motor Manufacturing Texas body-on-frame plant.
No additional jobs at the plant are anticipated, a spokesman for Toyota Motor North America said. The investment would boost the plant’s capabilities through the installation of additional robotics and other technologies. However, Toyota Group transmission supplier Aisin AW Co., which supplies the plant, in July announced a $400 million investment to bring 900 jobs to a new plant nearby in Cibolo, Texas.
[...]
Toyota’s investment also includes a $500,000 donation from Toyota Motor Manufacturing Texas to Alamo Promise, a local agency dedicated to addressing poverty, enhancing economic and social mobility and meeting work force demands locally. The donation will take place over five years.
With this new investment added in, Toyota Motor North America says it has invested over $3 billion in the San Antonio truck plant. That’s a pretty damn significant number—and it promises to keep production local for the foreseeable future.
4th: European Auto Sales Massively Suffer
Things just continue to look terrible for the European car industry. New car sales declined 8.4 percent this August, Bloomberg reports. That makes it the steepest monthly decline in 2019. And it doesn’t really seem like it’s going to be getting much better.
From the article:
The fall was partly due to exceptionally high growth a year earlier as manufacturers rushed out models ahead of tough new emissions-testing rules. Volkswagen AG shares lost 0.4% in early trading in Frankfurt and BMW AG was 0.3% lower.
In addition to the risk of a recession in Germany, carmakers are also facing a slowdown in the Chinese car market. European sales over the year to date are down 3.2% and the continent’s five biggest markets all contracted in August, with Spain and France posting the biggest slowdowns. The drop last month brought registrations down to 1.04 million units.
Nissan Motor Co. and Fiat Chrysler Automobiles NV saw the biggest slowdown in August sales at 47.5% and 26.5% respectively.
It became obvious how contentious things have been lately at the Frankfurt Auto Show. In addition to protests against SUVs, protesters also demanded industry action to combat climate change.
5th: Nissan Plans To Sell
Things haven’t been easy over at Nissan lately, and it sounds like everyone is ready to jump ship. As reported by Bloomberg:
Nissan Motor Co. is seeking to sell a wholly owned subsidiary that distributes vehicle parts and materials in a deal that may be valued at about $1 billion, as the struggling Japanese automaker seeks to slim down, people familiar with the matter said.
The company has invited private equity and trading firms to bid for 100% of Nissan Trading Co., according to the people, who asked not to be identified because the information isn’t public. The buyer may be selected by as early as October, according to the people. The target valuation includes assumed debt, they said.
While $1 billion sounds like a hell of a lot of money, it’s not. The subsidiary in question generated 676.1 billion yen ($6 billion) in the fiscal year that ended this March, Bloomberg reports. A mere $1 billion sale is pretty much the equivalent of giving the thing away to whoever wants it.
Reverse: Canada’s Guinness World Record
And I thought Bucc-ee’s parking lots were big.
Neutral: Are We Giving Enough Attention To EVs?
Yeah, it seems like EVs are all the rage these days, but at the same time, they also still kind of feel like a pipe dream. Plenty of automakers are pitching plans to unveil tons of EV models in the next few years, and even more of them are focusing their EV goals on wacky concepts. Are we giving EVs enough practical attention?
Correction: A previous version of this story incorrectly stated that striking UAW members had their General Motors health plans reinstated Wednesday. This was incorrect and the story has been updated. We regret the error.