Automakers are cutting costs (and jobs) to invest in electric cars, the Trump administration continues its fight with California over emissions regulations, Tesla boss Elon Musk is in court over a dumb Twitter comment, and FCA’s getting sued by seemingly everyone. All of this and more in The Morning Shift for Wednesday, Dec. 4, 2019.
1st Gear: Automakers Are Cutting Jobs To Invest In Electric Vehicle Technology: Report
“Carmakers Shed 80,000 Jobs as Electric Shift Upends Industry,” writes Bloomberg in a new story about the massive restructuring happening in the automotive industry. It’s just one of many recent stories covering how a shift towards electrification is putting strain on automakers and their employees.
From the story:
All told, carmakers are eliminating more than 80,000 jobs during the coming years, according to data compiled by Bloomberg News. Although the cuts are concentrated in Germany, the U.S. and the U.K., faster-growing economies haven’t been immune and are seeing automakers scale back operations there.
The German companies joined General Motors Co., Ford Motor Co. and Nissan Motor Co. in massive retrenchments put in motion over the past year. The industry is sputtering as trade tensions and tariffs raise costs and stifle investment, and as manufacturers reassess their workforce in an era of electrification, autonomous driving and ride-on-demand services.
The article goes on, stating:
The pace of job cuts in the home of Mercedes-Benz, Porsche and BMW is expected to be “more pronounced in 2020,” VDA President Bernhard Mattes said at a press conference in Berlin, adding that the technology shift alone could lead to the loss of 70,000 jobs over the next decade.
“A fundamental structural change with enormously high investments at a time of deteriorating market dynamics — the tension is being felt at many companies,” said Mattes.
Noting GM’s recent 40-day strike, a 15,000-person protest in Stuttgart decrying job cuts and plant closures, Nissan’s plans to cut 12,500 jobs in the next few years, Audi and Daimler’s plans to eliminate roughly 10,000 jobs, and Ford’s aim to eliminate 17,000 jobs, Bloomberg points out the widespread moves among automakers to reduce costs as a result of lower market demand for cars and higher investments in new tech.
It’s a big issue, and one we’ve written about before. ‘No One Is Safe’ as GM and Ford Cut Jobs and Costs,” we wrote back in March. “Daimler To Cut At Least 10,000 Jobs, Blames It On Electric Cars,” we published just a few days ago, just a couple of months after writing “EVs Are Coming For Your Job Just Like Every Other Innovation That Came For Your Job.”
This idea that the (inevitable) shift to electric vehicles is going to put auto workers out of a job has been around for a while, and it has folks concerned, especially the United Auto Workers union, who commissioned a study on the effect of electrification on jobs. The Detroit News wrote about that study in September. From the article:
The labor union commissioned a study titled “Taking the High Road: Strategies for a Fair EV Future,” which laid out all the threats the “coming shift to EVs” could bring to U.S. jobs. Electric vehicle powertrains will become cheaper, competition will get more intense and more governments will continue to enact strict emissions mandates. And that means demand will rise for cars and trucks that require fewer people to build.
The story noted some of the union’s main concerns, which deal with electric vehicles being significantly simpler to build than gas cars, and with outsourcing:
The flood of electric vehicles rolling out over the next decade will have many fewer parts and assemblies than today’s gas-powered cars and trucks. And that will radically change the auto factory floor, with fewer jobs and the real possibility that the batteries and electric motors that power the new vehicles could be sourced offshore.
Think about it: Fully electric cars don’t have multi-speed transmissions, radiators, fuel injectors, gas tanks, valvetrains or exhaust systems, to name just a few differences. While conventional drivetrains have as many as 2,000 parts, electric drivetrains can have fewer than 20.
The concern is real.
And while it makes sense that, near term, heavy investments in new tech will require cost-cutting, and it is commonly accepted that EVs are easier to build due to their fewer moving parts (particularly in the powertrain), it’s worth holding on to some skepticism about all of this talk about joblessness, especially when looking long-term. Our Aaron Gordon voiced some skepticism in his story about the aforementioned Detroit News story. From Aaron:
In any event, this article fits squarely within a classic genre of labor reporting: how innovation will result in joblessness. It’s a concern that dates back to the printing press, and one that has generally not come to fruition.
This isn’t to say some people who work in auto manufacturing are in for a tough time, but that other employment opportunities may arise, perhaps even within the automotive field, that will create new opportunities.
Perhaps they’ll be fixing onboard computers or charging stations instead of internal combustion engines. Or maybe this time is different and everyone is profoundly screwed in ways we cannot possibly fathom. Either way, we’ll find out soon enough.
2nd Gear: Shareholders Are Suing FCA
General Motors is suing Fiat Chrysler in a racketeering case, alleging that the Auburn Hills-based company’s bribery of union officials gave it a significant competitive advantage against other automakers like GM. “GM estimates that it has incurred massive monetary damage in the form of higher costs that it seeks in relief,” the lawsuit reads.
Now FCA is staring down the barrel of another lawsuit, this time from shareholders, with the Detroit News writing:
The class-action lawsuit from the Rosen Law Firm of New York takes aim at defendants, including CEO Mike Manley, executors of Marchionne’s estate and Chief Financial Officer Richard Palmer, who were not included in GM’s case. They knowingly misled investors, resulting in artificially inflated stock prices, according to the class-action lawsuit.
“The theory is that the company issued misleading information, such as in its annual report,” said Phillip Kim, a partner at Rosen. “Those are the folks who were responsible for the documents and certifying the accuracy of those documents. They signed the documents that are alleged to be falsely misleading.“
Those actions, according to the lawsuit, led to monetary losses for shareholders after GM filed its case last month alleging Marchionne masterminded a conspiracy, including bribery, that corrupted three rounds of bargaining with the United Auto Workers and harmed GM.
The news site mentions that FCA has called GM’s claims “groundless,” and that according to experts, it will be difficult for GM to prove racketeering charges.
3rd Gear: Elon Musk’s ‘Pedo’ Trial Continues But It’s Not Looking Good For The Tesla Boss
Vernon Unsworth, the British diver who helped rescue children from a flooded cave in Thailand last year, is suing Tesla boss Elon Musk for defamation. This comes after the tech billionaire referred to Unsworth as “pedo guy” after Unsworth, in an interview with CNN, called Musk’s efforts to contribute a custom-designed submarine to the rescue a “PR stunt,” and said Musk can “stick his submarine where it hurts.“
Per Business Insider, Unsworth’s lawyers say Musk was “suggesting the diver was a pedophile,” while Musk has argued that the phrase is a commonly-used expression in his birthplace in South Africa.
Business Insider covered the proceedings, highlighting a key fact: Unsworth isn’t considered a public figure, but rather just a private citizen. This will likely make it harder for Musk to get away with his crude words. From the news site:
Unsworth notched a victory in earlier proceedings when a judge ruled he was not a public figure, which lowered the threshold for proving defamation. The diver’s lawyers must now successfully prove that Musk’s actions demonstrated negligence to the extent that they harmed Unsworth.
Here’s a recap from yesterday’s Reuters story, which describes what Unsworth has to do to win the case:
To win the defamation case, Unsworth needs to show that Musk was negligent, which does not require an intent to defame.
He must prove the tweets were false, that Musk did not use reasonable care to determine if they were true, and that people reasonably understood them to mean he was a pedophile.
4th Gear: November Sales Were Good
Near the beginning of each month, we regularly report Automotive News’ assessment of how the previous 30-ish days of sales went for automakers, as well as the site’s thoughts on what the future looks like.
For a while, we’d been hearing that car sales had slowed, and that doom and gloom were on the horizon. And while the former seems to be true, the industry has been avoiding the tight grips of doom and gloom for a while, and it continues to do so based on this month’s sales. Per Automotive News:
Toyota Motor Corp., Honda Motor Co., Hyundai, Subaru and Kia posted higher U.S. sales in November, a sign that the industry is winding up the year with renewed momentum after an October lull.
Sales rose 9.2 percent at Toyota Motor, for its second-biggest gain but only fourth increase of the year. Honda Motor deliveries spiked 11 percent, its second double-digit gain in a healthy year. Hyundai tallied its 15th gain in 16 months, advancing 6.2 percent.
Sales also increased at Subaru, Mazda, Volkswagen and Mitsubishi. But at Nissan Motor Co., demand skidded 16 percent as the company continued to scale back on fleet shipments and incentives to shore up retail volume and profits.
The industry heads into December with a chance at topping the 17 million mark for a fifth straight year.
The news site says that, per forecasts from J.D. Power-LMC and ALG, an extra sales day and weekend, as well as “heavy holiday promotions and rising incentives that reached record levels during the month” aided in the year-over-year sales jump.
Senior economist at Cox Automotive Charlie Chesbrough attributes the strong sales to “strong labor and equity markets” and low unemployment rates. He says that “Until either of those changes substantially, strong vehicle markets are likely to continue.“
5th Gear: The Trump Administration Continues Its War Over California Emissions Standards
For decades, California has been setting the nation’s strictest vehicle emissions standards, even prompting automakers to offer special vehicle tunes and exhaust treatments specifically for California and other states abiding by its standards. The Trump administration is trying to put an end to California’s ability to make its own emissions rules, but the Golden State, and 22 other states following its rules are fighting back via a lawsuit—a suit that the Trump administration wants the court to toss, per Bloomberg.
From the news site:
In court papers dated Oct. 15 but made public Tuesday, Justice Department lawyers told U.S. District Judge Ketanji Brown Jackson in Washington that California’s regulation contravened NHTSA’s power to set uniform fuel economy standard for the nation.
“A standard that regulates tailpipe carbon dioxide emissions is not just ‘related to’ fuel economy standards. It is a fuel economy standard,” the department lawyers said.
The Justice Department also argued any state challenge to federal authority should have been filed at the U.S. Court of Appeals in Washington, and not at Jackson’s trial-level court. If the judge does not throw out the case, she should transfer it to the higher court, the department said.
In a reply to the last statement above, the states involved in the suit said this is happening in a trial court “because Congress made no provision for direct appellate review of challenges to the fuel economy regulation,” Bloomberg writes.
Reverse: Henry Ford Sets Sail On ‘Peace Ship’ In An Effort To End World War I
From History Nebraska:
In December of 1915 the chartered Oscar II carried an American delegation to Europe to exert moral, social, and diplomatic pressure to end World War I. The peace ship, as it was called, was sponsored by industrialist Henry Ford, who invited peace advocates from around the United States to accompany him to Europe. All expenses were paid by Ford.
[It]...lasted from December 4, 1915 to the end of January, 1916...
Neutral: Do You Think A Shift To Electrification Will Hurt Jobs Long-Term?
Or do you think it will bring about just as many new jobs?