1st Gear: Nearly Every Major Automaker Is Uniting To Campaign Keep The U.S. In NAFTA
The North American Free Trade Agreement has been with us since January 1994 and, in that time, has largely reshaped the auto industry, dispersing supply chains and assembly plants across the U.S., Mexico, and Canada. A withdrawal from that agreement, as President Trump has threatened to do, would upend that carefully-balanced ecosystem, and, automakers say, cost the U.S. a huge number of jobs.
When Trump took office in January, there was an air of trepidation among car companies, promises of efforts to work with the new administration as it potentially brought massive changes to trade policy.
The hesitation seems to be over. Now, Reuters reports, nearly every major automaker is binding together to fight any withdrawal, which could happen as soon as early 2018.
From Reuters:
Auto trade associations representing General Motors Co (GM.N) Toyota Motor Corp, Volkswagen AG, Hyundai Motor Co, Ford Motor Co and nearly every other major automaker, are part of the coalition dubbed “Driving American Jobs” and backing an advertising campaign to convince the White House and voters that the agreement has been crucial in boosting U.S. automotive sector production and jobs.
[...]
In the most recent round of talks to renegotiate NAFTA last week, Trump proposed changes to the rules of origin for autos, which are used to determine how much of an auto is made in a certain place. The proposed rules were viewed as untenable for automakers, as well as Mexico and Canada.
[...]
The auto coalition, which includes the Motor & Equipment Manufacturers Association and American International Automobile Dealers Association, said ending NAFTA, which underpins $1.2 trillion in annual trade between the three countries, would put U.S. auto sector jobs at risk.
It’s hard to get nearly every major automaker to agree on something, though one of Trump’s talents does seem to for uniting groups in opposition.
2nd Gear: Earnings Reports Are In! GM Did Pretty Well! Fiat Chrysler Also Did Alright
The auto industry has been on a pretty good run as of late, selling 17.55 million light vehicles in 2016, a number that is expected to only slightly decline this year. This means money and profits for automakers, of course; on Tuesday, both GM and Fiat Chrysler reported better-than-expected earnings in the third-quarter, causing shares to rise.
From Reuters:
The No. 1 U.S. automaker said it expects U.S. vehicle sales to remain stable at an annual pace of about 17 million light vehicles in 2017, “and we expect that in 2018 as well,” GM Chief Financial Officer Chuck Stevens told reporters on Tuesday.
[...]
GM posted lower revenue for the quarter as it shuttered plants in North America to reduce production and tackle bloated inventory levels, especially of unpopular sedan models as consumers move increasingly to pickup trucks, SUVs and crossovers.
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GM showed a pre-tax profit in North America despite [steep production cuts.] Stevens credited cost-cutting and a shift to higher-profit trucks and sport utility vehicles. The company cut North American production costs by $2 billion during the first nine months of 2017.
Fiat Chrysler also did alright, with third-quarter net-profit rising 50 percent, or higher than analysts had expected.
More from Reuters:
The world’s seventh-largest carmaker (FCAU.N) said net profit for the July-September period rose to 910 million euros ($1.1 billion), up from 606 million last year, and compared with an 808 million euro consensus in a Thomson Reuters poll.
3rd Gear: The European Union Has Now Raided Daimler And VW
It’s all part of an inquiry into an alleged vast cartel among every major German automaker that was revealed over the summer in a report in the magazine Der Spiegel, and comes on the heels of a raid at BMW headquarters that was disclosed last week. Der Spiegel alleged that the automakers conspired to supress the cost of diesel and other technologies for decades.
Daimler and VW had both said that they would be cooperating with authorities in the investigation, which didn’t stop a raid by E.U. officials on Monday.
From The Wall Street Journal:
Volkswagen said the commission examined documents at its Wolfsburg offices and the offices of its Audi brand in Ingolstadt as part of an announced review.
“The Volkswagen Group and the group brands concerned have been cooperating fully and for a long time with the European Commission,” it said.
Daimler said it was unclear whether officials would open a formal probe and also said the EU had previously announced its visit.
Daimler’s Chief Finance Officer Bodo Uebber said Friday the company had applied for key witness protections in the investigation.
Prediction: The investigation will take a very long time and probably end with some big fines for the automakers and then we will forget all about it.
4th Gear: Nissan’s Ongoing Inspections Scandal Is Hurting Sales In Japan
And kind of by a lot. According to Nikkei, sales in that country have dropped around 20 percent in a three week period beginning Oct. 1. The scandal has only widened in recent days as reports in Japan have said that inappropriate inspections might have been happening at the company’s production facilities for at least 20 years. Nissan has also shut down production at its Japanese plants while they try to get the inspections in order.
All of which has led to a swift response from Japanese consumers, who tend to not to tolerate these kinds of issues. From Reuters:
The Yokohama-based automaker’s domestic sales fell to 12,300 units during the period, the newspaper reported.
Last week, the country’s second-largest automaker said it would halt production of domestic market vehicles at all six of its Japanese assembly plants to consolidate their inspection lines to comply with the country’s transport ministry requirements.
The inspection scandal was expected to end the company’s 11-month streak of year-on-year domestic sales growth through September, the business daily said.
It’s probably wise to expect some more comeuppance in the coming days.
5th Gear: A New Jersey Car Dealership Has Filed What They Hope Will Be A Class-Action Lawsuit Over An Alleged Dealership Management System Conspiracy
If you’ve fallen asleep just reading that headline, do bear with me, because this might actually turn out to be a big deal. For dealerships, at least. Poor dealerships.
Nearly every dealership uses what’s known as a dealership management system, or a specially designed piece of software that tracks inventory, sales, parts, registrations, etc. Around 70 percent of them get that software from just two companies, CDK and Reynolds and Reynolds. Both of those companies are now being sued by a North Jersey dealership over alleged anticompetitive practices, according to Automotive News.
The premise of the suit, based in part other lawsuits, is pretty simple: the companies have used their dominant status in the market to drive up costs for dealers. The N.J. dealership, Teterboro Chrysler-Jeep-Dodge-Ram, is also seeking class-action for the suit.
From Automotive News:
The suit, which seeks class-action status, says a “conspiracy” between CDK and Reynolds since at least Jan. 1, 2011, to allocate market share and reduce competition resulted in the “fixing, raising and maintaining and/or stabilizing prices for the provision” of dealership management systems and data integration services. CDK and Reynolds control more than 70 percent of the DMS market.
Reynolds declined to comment on the latest lawsuit. CDK denied the accusations.
“The claims are meritless and amount to a rehashing of those already made. We remain committed to protecting our property rights and those of third parties on our systems, and will mount a vigorous defense,” a CDK Global spokesman wrote in an emailed statement to Automotive News.
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Before the alleged 2015 agreement between the two companies, data integrators charged vendors $50 per month for each dealership connection, the suit says. But the filing states that CDK and Reynolds have charged as much as $800 in some cases for the same integration services as they clamped down on who could access their DMS systems.
These increased integration costs are then passed down to dealerships.
It’s hard being a dealer.
6th Gear: Ford’s Chariot Is Back On The Roads In San Francisco
Last Thursday, the California Public Utilities Commission suspended the operating permit for Chariot, Ford’s commuter van service in San Francisco, after Chariot failed three inspections.
Yesterday, the company said that they’d resolved the problems—apparently related to special licenses needed for drivers—and would be back on the streets, according to the San Francisco Chronicle.
From the Chronicle:
“We’ve resolved the situation and do not expect any future interruptions,” CEO and founder Ali Vahabzadeh emailed customers Monday morning.
“We passed all inspections on Friday as expected and continue to be in compliance with all regulations,” Vahabzadeh added.
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Owned by Ford Motor Co., Chariot ferries thousands of commuters a day along popular corridors linking housing centers such as the Marina and Outer Richmond to employment centers such as downtown and South of Market. It is the only private commuter-bus service currently operating in San Francisco.
But the company faces controversies in its hometown. Transit officials say that its vans interfere with Muni buses and divert commuters and revenue. That’s led to a pending plan that would bar any private bus from creating new routes that are too similar to those of Muni. Existing routes would be grandfathered in.
Chariot, which adds new routes based on customer requests, said in a statement that the proposed route restrictions would have a negative impact on it, “preventing our ability to expand service to continue to fill in gaps in SF’s transit ecosystem.”
Reverse: The George Washington Bridge Opened On This Day in 1931
As a New Yorker, I don’t really have a hot take about the George Washington Bridge, other than that it’s pretty good at what it does, which is to shepherd cars and trucks over the Hudson River. It’s also a very terrifying bridge to walk over, though the views are nice. Try it some time!
The bridge opened on this day in 1931, or about two years into the Great Depression. It was dedicated by New York Gov. Franklin Delano Roosevelt, who, a year and a half later, would be president.
From History:
Workers built the six-lane George Washington Bridge in sections. They carried the pieces to the construction site by rail, then hauled them into the river by boat, then hoisted them into place by crane. Though the bridge was gigantic, engineer Othmar Amman had found a way to make it look light and airy: in place of vertical trusses, he used horizontal plate girders in the roadway to keep the bridge steady. Amman used such strong steel that these plate girders could be relatively thin and as a result, the bridge deck was only 12 feet deep. From a distance, it looked as flimsy as a magic carpet. Meanwhile, thanks to Amman’s sophisticated suspension system, that magic carpet seemed to be floating: The bridge hung from cables made of steel wires–107,000 miles and 28,100 tons of steel wires, to be exact–that were much more delicate-looking than anything anyone had ever seen.
The bridge opened to traffic on October 25, 1931. One year later, it had carried 5 million cars from New York to New Jersey and back again. In 1946, engineers added two lanes to the bridge. In 1958, city officials decided to increase its capacity by 75 percent by adding a six-lane lower level. This deck (the New York Times called it “a masterpiece of traffic engineering,” while other, more waggish observers referred to it as the “Martha Washington”) opened in August 1962.
[History]
Neutral: Do You Think Trump Will Actually Pull Out Of NAFTA?
I remain a little skeptical, but don’t listen to me.