Photo: Chevrolet

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: The February Auto Sales Dip Has Hit Big Trucks Particularly Hard

This is bad news for automakers, since trucks are huge money makers for them. How bad was it? Here’s Bloomberg:

Deliveries of Fiat Chrysler’s Ram pickup and GM’s Chevrolet Silverado and GMC Sierra trucks each fell by at least 15 percent in February. While the industry-leading F-Series line bucked the trend with a small increase, Ford Motor Co.’s total sales still missed estimates.

It was, in fact, the worst month since Hurricane Harvey.

Tepid demand for models that consistently rank among the top-sellers in the U.S. market was a major contributor to total U.S. vehicle deliveries decelerating last month to the slowest pace since Hurricane Harvey ravaged dealerships across the Texas Gulf Coast in August.

“It was a challenging month,” Jeff Schuster, senior vice president of forecasting for LMC Automotive, said by phone. “It’s a continued, steady softening of the market.”

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It’s not all bad, though, since while sales have dropped, that’s mostly because sales in recent months have been so good.

“This year is going to be a bitter but necessary pill for the auto industry to swallow,” said Jessica Caldwell, executive director of industry analysis at Edmunds. “The industry is still in a fairly healthy place, but it may not feel like it since the last few years have been in record territory.”

The automakers are also all still hugely profitable. Pour one out for hugely profitable multinational corporations.

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2nd Gear: You Know Who Is Doing Better? Luxury Brands

That’s because of Trump’s tax cuts, which will make the wealthy wealthier. The wealthy buy luxury cars, of course, meaning that the luxury brands don’t expect to take much of a sales hit this year, unlike the mass-market brands, who are all taking a hit.

From Bloomberg:

The four biggest high-end manufacturers in the U.S. all reported gains in February, led by a 12 percent jump for Volkswagen AG’s Audi. Daimler AG-owned Mercedes-Benz continued to lead all premium brands in total sales.

Higher-income buyers are going to benefit more from changes to the U.S. tax code, said Charlie Chesbrough, Cox Automotive’s senior economist. Wealthy consumers are also better equipped than those with low incomes to withstand the impact of higher interest rates, he told reporters on a conference call Thursday. Even if the economy were to weaken, “folks at the upper end of the income scale are not affected as severely as folks at the bottom,” he said. “So the luxury market should be just fine.”

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Yes, it’s good to be rich.

3rd Gear: How’s Subaru Doing? Ah, They’re Doing All Right

It’s all thanks to the Crosstrek, which helped Subaru to a 75th straight month (!) of year-over-year sales increases.

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From Automotive News:

“The Crosstrek continues to exceed expectations and will continue to deliver impressive results as its availability improves,” Jeff Walters, Subaru of America senior vice president of sales, said in a statement. “Based on initial pre-orders, the Subaru Ascent, arriving this summer, will be our next success story bringing new customers the best in safety and versatility.”

Some companies always win.

4th Gear: GM’s Cutting 5,000 Jobs In South Korea

That’s 30 percent of its South Korea workforce. Production, though, will remain at current levels. GM is trying to pressure the South Korean government into a $2.8 billion deal that includes taxpayer money to restructure its Korea operations.

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From Reuters:

The Detroit automaker, which owns 77 percent of GM Korea, is negotiating with the South Korean government over the restructuring proposal, as state-run Korea Development Bank (KDB) owns a 17 percent stake. GM’s main Chinese partner, SAIC Motor Corp Ltd (600104.SS), controls the remaining 6 percent.

In the plan it submitted to the government and seen by Reuters, GM Korea proposed cutting the number of employees to 11,000 from about 16,000.

Because only 2,000 people work at the Gunsan facility, it appears the other factories will also be affected. The document did not specify when the cuts would occur.

GM’s proposal may put the Seoul government in a bind, as President Moon Jae-in seeks to save thousands of jobs but could face a public backlash if he uses taxpayer money as a lifeline for GM.

[...]

Under the plan, GM would add its next-generation Trax small SUV and a brand-new compact SUV to its Korean production lines in 2020 and 2022 respectively, the document said.

The models are mainly aimed at the U.S. market, it said.

It plans to manufacture 200,000 vehicles of each, and keep its overall production in Korea near 500,000 per year over the next 10 years. GM produced about 508,000 cars last year, far below the combined capacity of 910,000 cars per year at its Korean factories.

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GM has been changing up its efforts abroad lately, as it seeks to shutter unprofitable parts of its businesses.

5th Gear: Trump’s Planned Tariffs Are Bad, Part Two

Trump said yesterday that he was planning to impose a 25 percent tariff on imported steel and a 10 percent tariff on imported aluminum. That idea has gotten a lot of people very angry, and also led to big declines on the stock market. A few other things it has complicated? The Trump administration’s efforts to renegotiate NAFTA. Oh, and also Canada’s mad.

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From Reuters:

Negotiators trying to rework the NAFTA trade deal on Thursday were hit by the prospect of conflict over U.S. steel tariffs that could complicate carmaking in North America, one of the most sensitive issues at the talks.

[...]

Officials were unable to say immediately whether the tariffs would include imports from Canada and Mexico, the other two partners in the 24-year-old North American Free Trade Agreement.

The lack of clarity created uncertainty as some countries might be exempt or taxed at a lower rate, analysts said. Automakers and other users of the metals are also worried about retaliatory tariffs that might affect their finished products.

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Canada would be among the countries hit the hardest should the tariffs go through, which has officials there very angry. Canada is one of the biggest exporters of steel and aluminum to the U.S.

More from Reuters:

“Should restrictions be imposed on Canadian steel and aluminum products, Canada will take responsive measures to defend its trade interests and workers,” Foreign Minister Chrystia Freeland said in a statement, calling any trade restrictions“absolutely unacceptable.”

She did not give details, and Canadian officials were not immediately available for comment on what measures she might have in mind.

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So, we might have a trade war on our hands pretty soon. It’s great living in the 18th century.

Reverse: Mustangs? Mustangs!

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Neutral: When Would You Buy A New Truck Over A Lightly-Used Truck?

I guess this is an evergreen question.