Why car dealers consider themselves “essential” enough to stay open during Coronavirus shutdowns, Tesla is finally stopping car production its Fremont plant, Germany considers pumping tons of money into its economy, and you can forget about new vehicle debuts. All that and more in The Morning Shift for Friday, March 20, 2020.
“Many Car Dealers Probably Won’t Come Back From This,” we wrote yesterday, outlining the daunting challenges dealers face as demand for cars shrivels up and some stores around the U.S. are forced to close.
The Detroit News wrote thatdealerships around the country are sanitizing cars, driving them to homes of prospective customers keen on avoiding showrooms, and “working out financing over the phone or internet.” These adjustments aren’t optimal for dealers, but they’re nothing compared to the looming threat of a shutdown, which is why the National Automobile Dealers Association (a trade group representing thousands dealers across the U.S.) and the Alliance for Automotive Innovation (a trade group representing dozens of automakers) sent a letter to President Trump asking him to allow dealerships to remain in operation during the Coronavirus outbreak. From the Detroit News:
Facing the prospect of expanding shutdowns as state and local government scramble to prevent the further spread of the virus, the National Automobile Dealers Association and Alliance for Automotive Innovation, which represent dealerships and carmakers respectively, said the Trump administration should make sure dealerships are exempted from any state or federally imposed restrictions on U.S. residents’ movements.
The letter, which you can read in full here, makes the case for why car dealerships should be considered “vital” and therefore fit to remain in operation despite COVID shutdowns.
“As our nation continues to confront the coronavirus’s challenges, we want to underscore the importance of ensuring that consumers have access to a safe and well-functioning motor vehicle fleet,” the letter reads. “Motor vehicles, both new and old, are critical to ensure that the public can get food and other necessities of life, as well as to continue to interact with one another in a manner consistent with public health officials’ recommendations.”
“Given the importance of safe transportation in addressing the coronavirus outbreak, we have an obligation to ensure that motor vehicles remain safe and are properly maintained.”
The letter then goes on to request that vehicle maintenance and sales businesses be called “essential” so that they can continue serving customers. The correspondence gives specific examples of vital services that a dealer might need to provide people during these trying times:
To that end, it is vital that vehicle repair, maintenance, and sales facilities be considered essential operations when federal, state, and local officials impose certain requirements due to the coronavirus outbreak. These facilities perform needed safety recall repairs, manufacturer warranty work, and safety-critical maintenance, including brake repair, steering repair, and much more. And they provide replacement vehicles when necessary.
The two trade organizations note that San Francisco’s shelter-in-place order gives “gas stations and auto-supply, auto-repair, and related facilities” a pass, by considering them essential. The groups hope that Trump can make this a standard in the nation, concluding its appeal:
...we hereby request that, as you consider further national initiatives to contain the severity and duration of the spread of the coronavirus, including potential Executive Orders, you ensure that our nation’s motor vehicle fleet remains as safe and operational as possible.
Tesla has continued building cars at its Fremont, California factory despite a Northern California order to shut down all non-essential businesses. There was some discussion about whether Tesla was considered “essential,” though the local sheriff put that to rest via Twitter:
In case you’re curious about the tweet above, the Alameda County Shelter-In-Place order defines “Minimum basic operations” as:
i. The minimum necessary activities to maintain the value of the business’s inventory, ensure security, process payroll and employee benefits, or for related functions.
ii. The minimum necessary activities to facilitate employees of the business being able to continue to work remotely from their residences.
Per Buzzfeed’s story from Wednesday, there’s been some back-and-forth between Tesla and local authorities on the issue of continued car production, but now a new Reuters report says Tesla is going to comply with the shelter-in-place order and stop producing cars beginning on Tuesday, and stick to basic operations. From the news site:
Tesla Inc said on Thursday it will suspend production at its San Francisco Bay Area vehicle factory on March 24, ending a standoff with California authorities concerned about the spread of the coronavirus.
“Despite taking all known health precautions, continued operations in certain locations has caused challenges for our employees, their families and our suppliers,” the company said in a statement.
The article continues:
In an email to employees on Thursday, Tesla said operations at the Fremont plant will transition to “minimum basic operations” beginning on March 24.
Employees at the California and New York factories will be provided with paid leave during suspended operations, the email said.
In our Morning Shift yesterday, we mentioned that “at least BMW, Mercedes, and Volvo appear to be keeping their [manufacturing facilities in the U.S.] open.” Well, now we’re hearing from Automotive News that a parts shortage could bring Mercedes’ Tuscaloosa, Alabama plant to a screeching halt. The news site quotes a memo sent from the plant CEO Michael Goebel to employees:
“Part of our supply base gets parts from Daimler operations in Germany and from across Europe,” Goebel wrote in the memo. “It is not clear yet exactly how our supply chain will be impacted, but it is foreseeable it will be difficult to get parts we need in the near future.”
Motor1 got comment from Mercedes on the matter:
“The production in the Mercedes-Benz Tuscaloosa plant is currently running. We are closely monitoring the situation and tracking our suppliers and parts situation continuously. The supply chain is currently secured and we are monitoring it on a day by day basis,” Birgit Zaiser, Manager of Production & Supply Chain Management for Global Communications Mercedes-Benz Cars & Vans, said in a statement to Motor1.com.
But while that Mercedes plant seems to be hanging on by a thread, Volvo’s plants in both the U.S. and Sweden are all shutting down according to Reuters. From the story:
Volvo’s Swedish factories in Torslanda, Skovde, Olofstrom, and its U.S. plant in South Carolina will close between March 26 and April 14, the company said. Its plant in Ghent, Belgium has already been temporarily shut down.
“Our primary concerns are the health of our employees and the future of our business,” Chief Executive Hakan Samuelsson said. “I think for the economy, we need to do something drastic, rather then trying half-hearted measures that drag on forever.”
“We are seeing the effect from this coronavirus is increasing every day. We see problems in the logistics supply side,” he told Reuters. “We have to help contributing to social distancing.”
This is all a huge deal. Shutting down an assembly plant for just a few days is a major financial burden to an automaker; to do so for a period of weeks can be crippling. The auto industry is in a rough spot.
Reuters references German magazine Der Spiegel, who talks about Germany’s consideration of a $500 billion fund to prop up the economy. From Reuters:
Germany plans a half-trillion euro fund to support companies thrown into payments difficulties by the coronavirus crisis, which will have the ability to guarantee liabilities or even inject capital when needed, Der Spiegel reported on Friday.
The roughly 500 billion euro ($538.05 billion) fund is modeled on the 480 billion euro Special Fund for Market Stabilisation that the government set up to prop up banks at the time of the financial crisis. The government is prepared to revive that fund too if banks get into difficulties, Der Spiegel said.
The U.S. is also on the path of doing something similar, which makes sense, as thousands of businesses have no way of making money right now. In many ways our economy is frozen, and the government knows it needs to intervene to keep it from collapsing.
Given all the craziness in this world right now, new vehicle debuts are probably the least of your concerns. But Jalopnik is a car website, so we’ll point you to a story from the Detroit News that discusses how Coronavirus has caused automakers to delay introduction of new models. Per the story, there’s quite a “stack up” of new cars as automakers wait for all of this to subside. From the Detroit News:
In an unprecedented seven-day period, automakers in the U.S. market — with one significant exception — shut down their media rollouts of new models to the public to stem the spread of the coronavirus. Like Hollywood’s postponement of new film releases, the delay will stack up introduction of new models and disrupt marketing plans.
The story mentions that GM canceled the media drive for the Chevy Trailblazer compact SUV, the Cadillac CT4, and the CT5. In addition, the article mentions that the first-ever electric Cadillac, the Lyriq, is also delayed as a result of COVID. Porsche apparently canceled a media drive for the 911 Turbo S, Ford canceled its planned debut of the new Ford Bronco,and the New York Auto Show is officially not happening until August at the earliest.
Current vehicles aren’t being built, and upcoming vehicles aren’t even being shown. The Auto industry simply isn’t moving.
Reverse: 1934 – Roosevelt Tries And Fails To Avert Historic Auto Strike, Establishes Organization To Fix Labor Problems
From the Brooklyn Daily Eagle on the days leading up to what became known as the Toledo Auto-Lite Strike—a 50+ day strike that required the National Guard to step in with tear gas:
ON THIS DAY IN 1934, the Eagle reported, “A telegraph from President Roosevelt asking that any strike action in the automobile industry be deferred until Thursday was made public in Detroit this afternoon by William Collins, American Federation of Labor representative, according to the Associated Press. The president’s telegram read: ‘In the public interest I am constrained to request you to withhold strike action called for this afternoon until I can have a conference in Washington in an effort to reconcile existing differences. I suggest Thursday. Will you advise me immediately? Franklin D. Roosevelt.’ Leaders of the industry, in session in Manhattan, in an attempt to avert a threatened strike, announced that they would go to Washington tonight in response to a request from President Roosevelt. In another last minute effort to avert ‘the greatest strike in history,’ six members of the National Automobile Chamber of Commerce conferred secretly for an hour this morning with Gen. Hugh S. Johnson, [National Recovery Act] administrator.”
A few days later, Roosevelt established the Automobile Labor Board, whose job it was to help end discriminatory practices in the auto labor sector, create a reasonable method of establishing seniority in the industry, to help create a collective bargaining process, and to help settle disputes between labor and management.
Obviously, dealers want to stay open, but does this make sense for the greater good given the pandemic? In my eyes, cars are freedom (and also a lifeline), so if you’ve got no way to mend your mode of transportation, that’s a problem. For that reason, I guess I could see the argument to consider dealers “essential.”