Brexit Is Screwing Up The British Car Industry Again

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: Brexit Still Doesn't Have Any Answers For The Auto Industry

Brexit, the ongoing thing where Britain shoots itself repeatedly in its own foot, just keeps dragging on and on without a lot of solid answers for companies who do business there. That uncertainty has the auto industry looking elsewhere.

Executives from 19 Japanese businesses including Nissan Europe Chairman Paul Willcox, Honda Europe boss Ian Howells and Toyota Europe CEO Johan van Zyl met with U.K. Prime Minister Theresa May that they would have to leave Britain if trade barriers put up after Britain breaks free from the European Union make doing business there unprofitable, reports Automotive News Europe.

They were backed up by Japan's ambassador to Britain Koji Tsuruoka as well, who said, as quoted by Automotive News Europe:

If there is no profitability of continuing operations in the UK – not Japanese only – then no private company can continue operations.

Together, the three Japanese auto companies build almost half of the 1.67 million cars in the U.K., and have spent over $56 billion in Britain in the process of doing business there. Major corporations have argued for at least a two-year transition period to ease into Britain's new trade status with the EU, and both Britain and the EU hope to agree to keep Britain in the EU's single market and bound by EU laws through the end of 2020.

After that, though, details are slim, as Reuters notes:

British Prime Minister Theresa May and her ministers assured Japanese businesses of the importance of maintaining free and frictionless trade after Brexit but said nothing firm on the matter, a source familiar with the discussions told Reuters.

With members of the U.K.'s Conservative party arguing for less alignment with the EU's customs union and laws, May's brief assurance is not exactly reassuring.

Without any firm details on the future, companies continue to look elsewhere for business they have been taking care of in Britain. Ford is the latest one, as they applied for a banking license in Germany in order to continue financing cars in Europe after the U.K. leaves. A spokesman for Ford told Automotive News Europe:

The reason that Ford Credit Europe has submitted an application for a German banking license is to ensure it is able to provide ongoing support for Ford dealers and customers post-Brexit.

Europe might not allow them to run their European financing arm in Britain after Britain leaves Europe, so Ford wants to bring that business onto the continent just in case. Currently, Ford Credit Europe is based in Warley, in southeast Britain.

2nd Gear: Some Of The Tesla Model 3 Tools Are Still In Germany

Some vital tools Tesla is depending on to meet its goal of building 2,500 Model 3 sedans a week by the end of March haven't made it to the Gigafactory yet, reports Automotive News. The good news is that they reportedly have all the tools they need to meet that goal. The bad news is that some of those tools are in Germany:

The electric-car maker, which is still targeting about 2,500 of the cars a week by the end of March, has designed a new automated system for module production for its U.S. battery factory near Reno, Nevada. The line is already working at its German Grohmann unit but it needs to be shipped to the U.S. next month before it can go into use, CEO Elon Musk said.

"That's got to be disassembled, brought over to the Gigafactory, and re-assembled and then brought into operation at the Gigafactory. It's not a question of whether it works or not. It's just a question of disassembly, transport and reassembly," he said on a conference call Wednesday.

Oops.

After that, they'll have to fix constraints on their materials handling processes in order to meet June's goal of building 5,000 Model 3s per month. They're all very aggressive targets, and because Tesla has a history of not meeting its self-imposed deadlines, it's hard to believe they'll meet these, too. We'll see!

3rd Gear: Activists Say The UAW Isn't Doing Enough About Racism

An activist group within the United Automobile Workers union called the Autoworker Caravan says the UAW's current leadership, along with that of automakers and suppliers, isn't doing enough about disturbing racially charged incidents that have become more frequent in auto plants, reports the Detroit Free Press:

Among the incidents that the group has heard of and condemns: A black worker encountered a noose at an auto plant in Wyoming, Mich.; shop floor supervisors at a non-union facility in Warren gestured to each other with Nazi salutes; and racist graffiti was found in the lavatories in an engine plant in Ohio.

"Several of these reports came from internal sources," said Frank Hammer, a retired local president and co-founder of the Autoworker Caravan. "We're seeing what may appear to be a pattern of heightened racists incidents that I, personally, believe is coming in the wake of Trump's election."

Hammer said the president's rhetoric during and after the election seems to be encouraging expressions and behaviors from workers such as hanging nooses.

Senior UAW Communications Adviser Brian Rothenberg told the Detroit Free Press that he did not know such incidents were on the rise, as they are handled at the local level within the 415,000-member union. However, he contends that the union takes concerns about racism in the auto industry very seriously.

Autoworker Caravan has been around since 2008 and includes around 200 active and retired UAW members. They plan to meet Sunday to discuss which members might run for positions within the UAW, and whether or not to propose resolutions about this behavior at the UAW convention in June.

4th Gear: Ford Credits Commercial Vehicles With Keeping It Afloat

Consumers are fickle with their vehicular wants, forcing automakers to chase fleeting trends as they come and go. Commercial buyers, however, are much less finicky—and Ford credits this underappreciated segment for giving them consistent source of profit. The Detroit Free Press writes:

Ford is one of the few automakers with a coordinated global strategy for commercial vehicles. It makes everything from the compact Transit Connect city delivery van to the bigger Transit UPS-style van, countless versions of its Super Duty heavy-duty pickups and behemoths like the F-750 that's the basis for everything from dump trucks to highway haulers just a step smaller than the biggest 18-wheelers.

Ford is currently featuring an updated Transit Connect Class 1 work van at the Chicago Auto Show—the first of many planned updates to its commercial vehicle lineup.

Ford is unique for its wide variety of commercial vehicles—from smaller vans like the Transit Connect all the way up to heavy-duty trucks—which has allowed them to take a 42 percent share of the U.S. commercial vehicle market. They sell work vehicles worldwide as well, allowing them to develop the smaller Transit Connect in other markets where small vans are used more often before it came to the U.S.

Because work vehicles always need replacing when they wear out, Ford credits them for providing a steady stream of new sales since they first unveiled a purpose-built work truck in 1916.

5th Gear: It's A Good Year For Profit Sharing

One way the auto industry gets rank-and-file employees to care more about the performance of the company as a whole is through profit-sharing—where they actually give UAW members a chunk of the profits when the company does well. The American auto industry has been doing well this year, too, as the Detroit Free Press explains:

[H]ourly employees whose contracts were negotiated by the UAW share the profits when companies do well and share the pain when profits dip.

Every spring since 2012, all three automakers have sent checks of varying amounts to their UAW workers. General Motors and Fiat Chrysler Automobiles will send this year's checks in February. Ford mails the checks in March.

This year, an estimated 50,000 GM workers will get $11,500 checks on average; 54,000 Ford workers will get $7,500 checks on average; and 40,000 FCA workers will get $5,500 checks on average.

These aren't bonus checks. They're part of a negotiated contract.

If the company does well, you do well. It's a line often touted by politicians when they want to cut big business big tax breaks, but something that far too rarely trickles down to regular employees' paychecks.

The UAW negotiated for these profit sharing agreements, though, and even investors feel as if it's good for auto employees to have a stake in the company's performance. "Let's all make more money" is also a rallying point for workers to focus on even during recent scandals like the FBI's UAW corruption probe, because, well, who doesn't like to make more money?

Investors also don't mind it because these beefy profit-sharing checks have been used to justify paying auto workers less up-front, as the Detroit Free Press writes:

Not raising fixed wage costs plays a role in labor negotiations, Masters said. "These employees went many years without any pay raise and had a multi-tier wage system that lowered the wage for many employees to a level substantially below the typical wage level."

Investors monitor how books are kept and which spending columns grow.

Profit sharing helps with a company's ability to attract investor dollars because less is spent on labor costs at the front end, regardless of results. That's appealing to investors, boards of directors and shareholders.

That specific piece may be less good for the individual worker, but with workers often spending their profit-sharing checks on high-cost items like new cars or college tuition, the entire profit-sharing deal also serves to boost the economy as well.

Reverse: The Name That Launched A Thousand Rap Lyrics

Neutral: How Do You Like Your Money?

I don't think it's too insane to ask for workers to get more of the pie when the company they work for is enjoying a lot of success. But how would you rather get that: in a profit-sharing system like the UAW has, or in a more traditional salary raise for doing well?