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 auto-related stories to read in our final hours together.
1st Gear: Car Buyers Continue To Fail At Basic Math
Car sales are down, but average transaction prices are up. Now, if people were smart, they would focus on getting the best car they can afford. Nope! More car buyers are opting for the same expensive cars, but are taking out seven or eight year loans. Automotive News reports that in the first quarter of 2017, over 33 percent of the loans were for terms longer than 73 months.
What is even more frightening is the popularity of long term loans on cars that are several years old. Karl Kruppa, senior automotive solutions consultant for Experian, explains this alarming trend. From Automotive News:
...about 30 percent of 2016 model-year vehicles are financed with 73- to 84-month loan terms. But lenders also are approving long-term loans on vehicles more than 5 years old. “You know what’s kind of startling?” Kruppa said. “There’s actually 10 percent of [2010 model-year] used vehicles being financed at a term between 73 and 84 months. Longer terms are here, and more and more lenders are willing to do that.
Seriously people, just because the payments are low doesn’t mean the car you want is “affordable.”
-Guest gear by Tom McParland
2nd Gear: Trump Wants “States, Cities and Corporations” To Fix Our Shitty Infrastructure
Instead of the federal government footing the bill to fix America’s broken bridges, pothole-filled roads and crumbling public buildings, President Trump wants to shift the burden to local entities like cities, states and businesses, The New York Times reports.
The president plans to reveal how he’ll do this, as well as how he’ll “modernize and privatize” the air traffic control system, on Monday at the White House, though detailed plans on how the president hopes to get $1 trillion worth of infrastructure projects underway are likely “weeks or even months from completion.” The New York Times goes on, saying:
The federal government would make only a fractional down payment on rebuilding the nation’s aging infrastructure. Mr. Trump would rely on a combination of private industry, state and city tax money, and borrowed cash to finance the rest.
This would be a long cry from America’s traditional infrastructure programs that relied on federal assistance to bear the brunt of the costs for large projects. The goal of the approach, according to officials, would be to “[meld] public and private forces to rebuild the nation’s physical backbone will vastly expand the resources available to pay for doing it.”
Director of the National Economic Council and contributor to the infrastructure plan Gary Cohn told the Times:
We like the template of not using taxpayer dollars to give taxpayers wins...We want to be in the partnership business...We want to be in the facilitation business, and we’re willing to provide capital wherever necessary to help certain infrastructure along.
As an example to the administration’s new approach to infrastructure, The New York Times discusses the air traffic control overhaul, saying:
As a model for the approach, Mr. Trump plans on Monday to send a proposal to Congress for overhauling the nation’s air-traffic control system. He would spin it off into a private, nonprofit corporation that would use digital satellite-based tracking systems, rather than land-based radar, to guide flights in the United States. There would be no cost to the government, Mr. Cohn said, because a newly formed corporation would finance the entire enterprise, using loans to handle the initial costs of equipment and other needs.
President Trump will speak with mayors and governors this Thursday, and on Friday, he’ll visit the Department of Transportation and talk about how to reduce how long it takes for the government to issue permits for major infrastructure projects.
Whether the new administration’s plan will work, we don’t yet know—in part, because details remain scarce. But an official at the Transportation Department under President Obama, Sarah Feinberg, is skeptical, saying:
The idea that this really minimal amount of federal investment will spur that level of private investment is hopeful but not realistic...The reality is, the state of infrastructure has become an existential threat to huge portions of the economy.
We’ll hopefully see more details on Trump’s plan this week.
3rd Gear: GM Leaving India Because Of Their Own Incompetence
GM is done selling cars in India because the company didn’t see a clear pathway to profitability. Meanwhile, other automakers are full steam ahead in the second most populous country on earth. What gives? Automotive News says GM’s departure has more to do with the company’s own “missteps” than anything wrong with the Indian car market.
The news site points out that Hyundai, Suzuki, Honda, and Toyota “have done a better job reading the market and offering vehicles that match consumers’ needs and desires,” and even Fiat Chrysler and Ford have been doing well in India (with a spokesperson for the latter telling Automotive News “India remains important for us going forward.”)
Industry analyst Puneet Gupta from IHS Markit told the News:
We think they may have misfired on understanding the customer aspiration for Chevrolet, especially in the last five years.
GM’s market share dropped from 4 percent down to 1 percent in the last six years. And despite the potential other companies see in the market, GM’s CEO Mary Barra is whittling down on parts of the company that aren’t making money (GM pulled out of Europe earlier this year after over 90 years).
While GM is only going to keep one plant in India open as an “export hub,” the cross town rivals will do more, with Ford spokesperson Kapil Sharma saying the last few years have been “encouraging,” Jeep’s CEO Mike Manley telling Automotive News last year:
Even when global manufacturers break into that marketplace, it is with their lowest-cost platforms. All the signs are that, at some stage, India is going to develop and develop strongly, which is why we need to be there.
So GM is leaving a market that IHS expects to soon become the fourth largest in the world, and one that a number of automakers are actively investing in. Seems short-sighted.
4th Gear: Ford’s New CEO Must Fix A Broken Corporate Culture
With Ford’s CEO Mark Fields out, Jim Hackett—former furniture company CEO, interim athletic director at the University of Michigan, and chairman of Ford Smart Mobility—has quite bit of work ahead of him.
Though Ford’s official press release says Hackett’s main jobs will be to “[sharpen] operational execution... [modernize] Ford’s business... [and transform] the company to meet future challenges,” Automotive News says Hacket’s got a bigger job to take care of before any of that happens: he’s got to fix a “toxic” corporate culture at the top of Ford Motor Company.
The News mentions that, according to a source, Mark Fields was planning to fire Joe Hinrichs, executive vice president and president of global operations to “relieve pressure [Fields] faced from a skeptical board of directors.” Clearly, that didn’t work out, and Fields got the boot instead.
Automotive News reports that drama is an indicator of a crippled corporate culture that Hackett—a guy new to the auto industry surrounded by veterans—is going to have to fix.
Hackett’s challenge with his management team will be in learning how to check egos and balance competitive personalities, insiders say.
Executive Chairman Bill Ford told Automotive News:
If we’re going to solve problems with teams and get the best out of our people in the future, we have to get rid of the hierarchical mindset where people feel like that can’t really participate because their boss is in the room...If we’re going to empower our organization, they have to feel less hierarchical, so that everyone’s opinion is listened to.
The newcomer CEO will have to figure out how to get automotive industry veterans, some of whom were passed over for the top job, to work with him and with one another to keep Ford moving forward. It’s going to be a tough job, especially since many of the executive roles are still in the process of being defined. We’ll see if Jim can Hackett. (Sorry.)
5th Gear: Sega’s New ‘Crazy Taxi’ Game Calls Out Uber And Self-Driving Cars
Sega has a new game for Android and iOS users called “Crazy Taxi Gazillionaire,” a play on the 1999 game Crazy Taxi. The new game is a bit weirder, though, making it a point to communicate the plight of struggles drivers in an age where ride-hailing has become the norm and self-driving cars are on the horizon.
Motherboard mentions how much Sega uses the game as a platform to raise awareness over the issue, saying:
Virtually every interaction outside of gameplay imparts some kind of commentary about the cab industry’s plights in the context of competition from Uber and (soon, possibly) its self-driving cars.
Berry, a taxi driver in the game, says: “Listen: us real, human cabbies need you. We have to take taxi driving back. Put me to work for you.” It gets even more strange, as Leif Johnson from Motherboard describes an interaction with a customer, saying:
I met one potential rider in the game who mocked my cab for looking like it’s from 1999 and who preferred to go with the “hybrid blimp with triple-filtered bottle water” from the competing “Prestige Megacorporation,” which uses “robot” drivers.
The article goes on, describing Prestige Megacorporation, making the fake company sounds rather familiar:
As for Prestige itself, it’s owned by a dandified jackass named Edelbert von Güber, who taunts me while The Offspring sings “You don’t want to change the world like you say / You’re in it for yourself, no one else.”
“What a quaint little cab,” von Güber says, after I buy my first car. “People said as much in the 1-star Yowl reviews I paid them to submit.”
It’s a very strange platform to use to bring up such a divisive social issue, but hopefully the game is fun like the original Crazy Taxi game of the ’90s.
On this day in 1998, 3,400 members of the United Auto Workers (UAW) union walk out on their jobs at a General Motors (GM) metal-stamping factory in Flint, Michigan, beginning a strike that will last seven weeks and stall production at GM facilities nationwide.
Neutral: Will Car Buyers Ever Stop Seeing Things In Terms of Monthly Payments?
So many car buyers don’t bother to do math, and instead simply look at what the monthly car payment is. “Oh, this brand new hatchback is only $500 a month, what a deal!” they say as they signed the dotted line on an 84 month loan. Little do they know, they’ve just hugely overpaid for their car. But will this mindset ever change?