Boeing has suspended 737 Max production until further notice, Toyota announces plans for deploying its advanced self-driving tech and news about European car sales. All this and more in The Morning Shift for Tuesday, Dec. 17, 2019.
1st Gear: Suspended
In March, Boeing’s 737 Max was grounded around the world after two fatal and extremely publicized crashes due to an issue with faulty sensors in the flight control systems. Nine months later, the company has made the decision to suspend further production of the plane.
Yesterday, Boeing announced its intent to suspend 737 Max production starting in January, according to a company press release. The suspension is temporary, but the company did not say how long we can expect it to last:
Throughout the grounding of the 737 MAX, Boeing has continued to build new airplanes and there are now approximately 400 airplanes in storage. We have previously stated that we would continually evaluate our production plans should the MAX grounding continue longer than we expected. As a result of this ongoing evaluation, we have decided to prioritize the delivery of stored aircraft and temporarily suspend production on the 737 program beginning next month.
We believe this decision is least disruptive to maintaining long-term production system and supply chain health. This decision is driven by a number of factors, including the extension of certification into 2020, the uncertainty about the timing and conditions of return to service and global training approvals, and the importance of ensuring that we can prioritize the delivery of stored aircraft. We will continue to assess our progress towards return to service milestones and make determinations about resuming production and deliveries accordingly.
Predictably, orders for the plane all but vanished following the grounding. Boeing was finally able to lock down some new order (30 plans total) just last month, reports CNN. During that time, however, the company kept up production in the hopes regulators worldwide would re-approve the planes. (They haven’t done that yet.)
The repair process, too, was messy. There were so many planes waiting to be fixed they had to be parked in the employee parking lot. Airlines were scrambling to fill gaps left by the 737 Max and some even leased old 737-200s, a plane that has been discontinued since 1988.
The first of the two crashes involved a Lion Air plane that crashed into the Java Sea in Oct. 2018 that killed 189 people. The second was an Ethiopian Airlines plane that went down near Addis Ababa in March that killed 157 people.
At this time, Boeing says it doesn’t expect furlough or layoffs.
2nd Gear: Commercial Vehicles First
Self-driving tech and autonomy are all the rage for automakers right now. Toyota has plans of its own, but it won’t deploy the tech on private cars at first. Rather, commercial vehicles will be the first to get the company’s self-driving system.
The move to give commercial vehicles “advanced self-driving features” is “easier,” according to Reuters. From the story:
It will be easier to apply self-driving technology that does not require constant and direct human-monitoring to taxis and vehicles Toyota is developing, including on-demand ride services, mobile shops and ambulatory hospitals, said James Kuffner, chief of Toyota Research Institute-Advanced Development (TRI-AD).
The operators of these vehicles could control when and where they are deployed and oversee their maintenance, he told reporters at the opening of its new offices in Tokyo.
Kuffner, additionally, said it would take more time for a privately owned car to achieve Level 4 autonomy. For a chart breaking down all the levels of autonomy, please consult this one.
Toyota, it seems, is willing to wait and iron out all the wrinkles it can before releasing advanced self-driving technology to the general public. Unlike a certain other automaker.
3rd Gear: Flat Year Of Sales For The Europeans
November was actually not bad in terms of car sales for European automakers, but it still wasn’t enough to reverse the general downward trend of 2019.
European car sales went up by 4.5 percent last month, which marks a third straight month of gain in a year that’s been tumultuous with trade wars, economic issues and general sales slowdowns, reports Bloomberg. This, unfortunately, still wasn’t enough to turn the year around; overall sales since January are still down 0.3 percent.
From the story:
Like the two previous months, the November figure was helped by a low base for comparison in 2018, when sales dropped off sharply due to carmakers’ difficulties adapting to new rules on emissions.
In order to avoid a drop for the whole of 2019, European car sales will have to increase by roughly 4.2% in December compared with last year. They fell 0.04% for all of 2018.
The latest regional statistics indicate the year is shaping up to be lackluster. The industry is battling a slowdown, while under pressure to spend huge sums to develop electric and self-driving vehicles.
Some automakers have deepened ties or decided to merge, while manufacturers worldwide are eliminating more than 80,000 jobs in the coming years, according to data compiled by Bloomberg News, as they push to lower costs.
2020 will see European automakers shift their focus to electric cars, as Europe is heading into aggressive legislation that aims to cut down on emissions within the next few decades. The trick is getting consumers to buy into that trend, too.
4th Gear: Toyota Not Doing Too Badly
Toyota’s sales, meanwhile, are apparently catching up to industry giant Volkswagen’s.
The Japanese automaker forecasts 2020 worldwide sales of 10.77 million cars, reports Bloomberg. From the story:
Toyota’s outlook, which includes vehicles sold by subsidiaries Daihatsu Motor Co. and truck maker Hino Motors Ltd., shows slight growth from an estimated 10.72 million vehicles this year. Volkswagen sold 10.8 million units in 2018 and said in October it expects deliveries to be little changed this year.
The maker of Prius hybrids and Tacoma trucks is among the automakers that are still delivering better-than-anticipated results. Even so, Toyota forecasts that it will sell 4% fewer vehicles in Japan next year, or 2.26 million units.
The end of this decade and the next one provides what Bloomberg calls a “once-in-a-generation industry shift” toward EVs, ride-on-demand opportunities and self-driving tech (as highlighted above). Will all the tech and EVs be enough to drag up sales? Guess we’ll find out.
5th Gear: Congratulations, Tesla
It has come to my attention that the deepest and most sincere of congratulations are in order for Tesla.
Shares of the company, which is publicly traded, “touched their highest in more than a year after a host of positive news boosted sentiment for shares that have underperformed the broader market this year,” reports Bloomberg. Tesla stock rose seven percent yesterday and shares are up 15 percent this year.
The confidence, according to Credit Suisse analyst Dan Levy, comes from Tesla’s software and electrification. From the story:
The analyst said a visit to the company’s gigafactory last week “reinforced why Tesla is likely ahead of others on batteries – the core of the electric powertrain.”
Further, the opening of Tesla’s Shanghai Gigafactory earlier this year means Model 3 production for the region has ramped up and deliveries are happening.
Good job, Tesla.
Reverse: First In Flight
Neutral: Do You Think The 737 Max Is Finished?
Or do you think Boeing will be able to rebound from this one?