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 stories you need to know.
1st Gear: Nissan’s Inspections Scandal Keeps Getting Bigger
Yesterday, we learned that Nissan was shutting down production in Japan for a couple weeks while it tried to get to the bottom of an inspections scandal that has forced them to recall 1.2 million vehicles. Nissan also said that, somehow, the inappropriate final inspections were still going on at plants in Japan as late as this week, well after the recalls.
But the scandal seems to only grow by the day, with the Japanese broadcaster NHK reporting on Friday that inappropriate inspections have been going on at Nissan for at least 20 years.
An internal investigation at Nissan had shown that for at least 20 years the automaker had not been following proper procedures for final inspections required by Japan’s transport ministry of all vehicles sold in the country, NHK reported, without citing any sources.
Transport minister Keiichi Ishii on Friday said that Nissan’s inspection of its assembly plants was ongoing, adding that it remained unclear how long the final inspections had been conducted by uncertified technicians, a violation of ministry requirements.
A Nissan spokesman declined to directly confirm or deny the NHK report, and referred Reuters to CEO Hiroto Saikawa’s comments on Thursday, when he said Nissan’s training system for certifying vehicle inspection staff had not changed for 20 years.
Saikawa had added that was a separate issue from how long the misconduct had been going on. He said that it appeared that a focus on increasing the efficiency of the inspection process and poor communication at assembly plants appeared to have contributed to the issue.
Twenty years of inappropriate inspections! That is incredibly reassuring. Again, none of these cars reportedly were exported to other markets like ours, so North American vehicles aren’t affected. But it’s growing into a big mess in the home country.
2nd Gear: GM Will Pay $125 Million In Ignition Switch Settlement
More than 100 people died and hundreds more were injured as a result of bad ignition switches in GM-made cars like the Saturn Ion and the Chevy Cobalt, prompting a scandal and the recall of 2.7 million vehicles in 2014. It also prompted a lot of lawsuits and claims from dozens of states, the latter of which GM and 49 states settled on Thursday, with the automaker agreeing to pay another $125 million to settle some claims. The settlement was announced in a joint statement by state attorneys general.
From the Detroit Free Press:
The settlement announced Thursday comes after the U.S. Supreme Court ruled earlier this year that GM could no longer avoid hundreds of lawsuits from victims of the defective ignition switches in accidents occurring before GM filed for Chapter 11 bankruptcy in 2009.
Michigan will receive almost $4.3 million as part of the settlement reached between the attorneys general of 49 states, the District of Columbia and GM in a case set in Ingham County Circuit Court, according to the Office of Michigan Attorney General Bill Schuette. The money will go into the state’s general fund, and the settlement does not include what the company has paid to individual consumers.
“There is no denying having cars on the road with faulty ignition switches was dangerous,” Schuette said in a release. “Today’s settlement shows General Motors is taking responsibility and committed to moving forward and creating quality cars Michigan residents can trust.”
GM said it had reached a “constructive resolution” with the state attorneys general and the District of Columbia.
In cases like this, “constructive resolutions” usually involve huge piles of cash.
3rd Gear: Daimler Is Making Money
Probably the most durable—in a business sense—of the European automakers, Daimler’s Mercedes unit once again helped it to a profitable third quarter, according to Bloomberg, despite a diesel problem that forced them to upgrade three million vehicles at a cost of $535 million.
“Mercedes remains the fastest growing and most confident of the big German premium brands,” Max Warburton, an analyst at Sanford C. Bernstein Ltd., said in a note.
Daimler and other European carmakers are struggling with the fallout from Volkswagen AG’s diesel-emissions cheating that emerged two years ago. Mercedes has been tainted by the scandal as German authorities take steps to reduce pollution from the technology, which is a key profit driver and important for meeting increasingly stringent carbon dioxide-emissions regulations. The financial hit from the demand reversal has been less severe than feared.
“In absolute terms, we’re selling more diesel cars,” Chief Financial Officer Bodo Uebber said Friday on a call with reporters. “In relative terms, there is a change to the downside, but it’s far less for us than what’s been reported for the overall market.”
Daimler, which is also the world’s biggest maker of commercial vehicles, reported a 14 percent decline in group earnings before interest and taxes to 3.46 billion euros for the third quarter, but still stuck to its expectation of “significantly” boosting earnings, revenue and vehicle deliveries for the year.
4th Gear: Bentley Is Replacing Its CEO
Wolfgang Durheimer, who has been the Bentley boss since 2014, is out, in an apparently drama-free reshuffle of the company’s top ranks that was announced on Friday. He will be replaced by Adrian Hallmark, who used to the global strategy director at Jaguar Land Rover.
From Automotive News:
Bentley’s board members for engineering, sales and marketing, and human resources will also step down, effective January 1, 2018.
Durheimer, 59, will stay on at the VW Group to assist with the automaker’s motorsports efforts. It’s a fitting culmination to a career that oversaw the development of two generations of the Porsche 911, the Bugatti Chiron and the Porsche Carrera GT and 918 Spyder.
An engineer by trade, Durheimer joined Porsche in 1999, a decade before VW Group bought a controlling stake in the sports car brand. He became Bentley’s CEO in 2011, moved to Audi in 2012 and returned to Bentley in 2014.
Hallmark’s appointment as CEO is a homecoming of sorts for the 55 year-old executive. Prior to posts at Jaguar Land Rover and Saab, Hallmark served as executive vice president of Volkswagen of America starting in 2005. Before coming to the U.S., Hallmark had served as a Bentley board member for sales and marketing since 1999.
The story doesn’t indicate why the moves happened, but the VW Group as a whole has been shuffling management around quite a bit lately in the wake of the Dieselgate scandal.
5th Gear: American Dealers Aren’t Making As Much Money As They Used To
The National Automobile Dealers Association said Friday that they expected about 17.1 million vehicles to be sold this year, but that profits weren’t exactly coming in as expected.
That’s because automakers are currently producing more vehicles than there is demand for, meaning that dealers are having to scrap to get sales, and, frequently, undercut their competitors on price, reducing profit margins.
From Automotive News:
“There is a lot of sales pressure in terms of margins and rising incentives,” Steven Szakaly, NADA’s chief economist, told Automotive News. “We had a really good month last month, but that was due to Houston,” where sales spiked as consumers replaced vehicles in the aftermath of Hurricane Harvey.
Based on the midyear results, released Thursday, Szakaly said dealers can expect continued profit erosion in the months ahead. Manufacturing “is still running higher than the annual sales pace,” he said, a trend that traditionally leads to greater price competition and profit-sapping incentives.
Through June, average light-vehicle dealership sales were $16.6 million, vs. $16.8 million in the year-earlier period, the report said. The average number of new vehicles retailed at a dealership was 449, up two from the same period in 2016 and 2015.
But gross profit as a percentage of selling price was 5.9 percent, down from 6.1 percent a year ago and 6.5 percent in the 2015 period. In dollar terms, average retail gross profit per new vehicle sold was $2,014, vs. $2,075 a year earlier and $2,148 in 2015, the report said.
On a bright note, finance and insurance income as a percentage of new-vehicle sales rose to 2.9 percent from 2.7 percent a year ago.
The average new-vehicle selling price through June was $34,335, compared with $34,221 in the year-earlier period, said the report.
Over $2,000 profit per vehicle is still... not bad? I dunno.
Reverse: The Last Volvo PV Is Built
The Volvo PV was beloved, sturdy, old-fashioned-looking and surprisingly fast, a mainstay of the companies first few decades. On this day in 1965, the last one rolled off the assembly line in Sweden.
After World War II, the company unveiled the PV444—between 1947 and 1958 it sold more than 200,000 of the diminutive cars—and it introduced the PV544 in August 1958. The two cars were virtually identical—both were slightly humpbacked and dowdy—except that the PV544 had a one-piece windshield in place of the PV444’s divided one, a larger rear window and a bigger flip-out side windows, all of which brightened up the car’s interior considerably. Neither model ever had four doors, right-hand drive or an interior clock.
Despite the cars’ anachronistic appearance, people loved them. A PV Volvo might have looked stodgy, but it did not drive it: it could go from zero to 60 mph in 13 seconds, could cruise comfortably at 70 mph and got 27 miles per gallon on the highway. The PVs were great family cars but they were also powerful, sturdy racers: In 1965, for example, Kenyan brothers Joginder and Jaswant Singh won one of the toughest road races in the world, the 3,000-mile East African Safari rally, in their 1964 PV544. (Among other things, drivers in the safari had to negotiate falling boulders, mud puddles, errant herds of buffalo and giraffes blocking the road.)
Of the 440,000 PVs built, 280,000 stayed in Sweden. Most of the rest were exported to other European countries. In 1966, in place of the PV-series cars, the company introduced the 144 sedan, the car that is the ancestor of the boxy Volvos seen today.
Neutral: What Was Your Last Trip To A Dealership Like?
The last time I went to a dealer I ended up leaving with a 2007 Saturn Ion. I’m still mad about it.