Image: Justin Sullivan (Getty Images)

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: California Could Fight The Trump Administration Over Emissions Standards

After the Trump administration announced its longstanding intention Monday to roll back the stricter Obama-era fuel-economy and emissions standards, The New York Times reports that California is trying to negotiate that with Trump officials. The Environmental Protection Agency under Obama set regulations to hold carmakers to a standard 54 MPG for light-duty vehicles by 2025.

EPA administrator Scott Pruitt demanded California fall in line with the new, looser standards, but California isn’t giving up yet. From The New York Times:

That announcement raised the specter of a messy legal battle between the Trump administration and California, which has the legal authority to write its own air pollution rules and has threatened to sue to protect that authority.

Though California’s authority is considered to be on solid legal footing, a protracted legal fight would raise the prospect of uncertainty and a domestic auto market split between the states that follow stricter emissions rules — California and 12 other coastal states that adhere to its standards — and the ones that would allow for dirtier cars. [...]

But privately, officials from the Trump administration and California, along with representatives of major automakers, are searching for a compromise that could save a uniform set of standards for the entire country, according to a half-dozen people briefed on recent communications among the parties. One person close to the Trump administration said he considered communications with California as “active and ongoing.”

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There may be hope yet that we Americans won’t choke our own earth on our fumes. The New York Times has more on the ongoing negotiations.

2nd Gear: Smaller Subprime Lenders Are Failing As Payments Fall Behind

Bloomberg reports that more and more subprime auto lenders are shutting down due to losses and small profit margins on loans, which is leading their funding entities to cut them off. Some lenders have been accused of misreporting losses, others fraud, and some just can’t make profits, according to the report.

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Subprime loans are loans that can be given when people have tough financial situations like bad credit and low income, and they usually have higher interest rates than the typical loan. A lot of the issues have to do with people not being able to pay their notes, and lenders losing money as the payments fall behind.

Here’s a good summary of the situation, from Bloomberg:

The pain among smaller lenders has parallels with the subprime mortgage crisis last decade, when the demise of finance companies like Ownit Mortgage and Sebring Capital Partners were a harbinger that bigger losses for the financial system were coming. In both cases, rising interest rates helped trigger more loan losses. [...]

This time around, the financial system’s losses are expected to be much more manageable, because auto lending is a smaller business relative to mortgages, and Wall Street hasn’t packaged as many of the loans into complicated securities and derivatives.

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But Bloomberg reports that this is something subprime lenders in the auto industry have seen before, with 41 of them closing down or being acquired as losses when loans piled up between 1997 and 1999. From Bloomberg:

For this cycle, easy money may have spurred lenders to be looser in their underwriting or fail to properly vet borrowers’ incomes, said Colonnade’s Gillock. In Summit’s bankruptcy documents, lender Bank of America said the company had repossessed and sold millions of dollars worth of cars without writing down the loans. The move allowed the company to hide operating losses and borrow more money to fund loans, the bank said. Summit for its part said in court documents that it was forced to file for bankruptcy after delinquencies rose following Hurricane Irma.

With Spring Tree, an investor said he had loaned $300,000 to the company in 2015 with the understanding that his money would be fully secured and would be the first to get paid back if borrowers on auto loans defaulted. In a lawsuit filed in November, the investor said he had been defrauded. In March, a separate investor filed to put the lender into involuntary bankruptcy.

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Bloomberg has a lot more on the story and current lender climate here, if anyone is feeling particularly sorry for higher-interest lenders.

3rd Gear: Tesla Crashes Are A Lot Harder To Look Into

For what seems like forever, the “black box” recording device has been an important part of transportation investigations—missing airplanes and the like. But they’re not in things like Teslas, making it hard to probe into crashes like the recent fatal Model X crash.

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Cars don’t have that requirement like airplanes do, meaning investigators into fatal crashes like this one have to rely on manufacturers for data from them. From Bloomberg:

The problem for U.S. accident investigators is that the information wasn’t easily accessible. The data stored on the Tesla is in a proprietary format that can only be accessed by the company. Similarly, the information the vehicles beam to Tesla computers on a regular basis can’t be obtained without the company’s cooperation. [...]

That requires a cooperative relationship that appears tested by the latest accident, on March 23. While the agency says Tesla has been responsive, the company’s decision Friday to release information on the investigation without NTSB’s permission and a Monday afternoon Twitter jab against the safety board by Elon Musk, the company’s chairman and chief executive officer, has heightened tensions.

Musk defended his company’s decision to release the information. “Lot of respect for NTSB,” he said on Twitter, adding: “Tesla releases critical crash data affecting public safety immediately & always will. To do otherwise would be unsafe.”

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With how many vehicles are coming onto the road with autonomous and semi-autonomous technology, this sounds like it could turn into a real transparency issue. Bloomberg has more on the relationship between companies with various levels of autonomous technology technology and investigators.

4th Gear: Trump Expected To Nominate New Head Of The NHTSA

The Wall Street Journal reports that the White House announced Thursday night President Donald Trump plans to nominate Heidi King to run the U.S. National Highway Traffic Safety Administration, which hasn’t had an official head since Mark Rosekind left before Trump’s inauguration in January of 2017.

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King, a former General Electric executive, has been the deputy administrator of the NHTSA since late last year, and she’d take over the NHTSA at a time when crashes with self-driving cars are becoming a major issue. From the Journal:

Ms. King dispatched investigators in March to examine two separate fatal crashes linked to automated-driving technologies. On March 18, a pedestrian was struck and killed by an Uber Technologies Inc. self-driving car with a safety operator at the wheel in Arizona. A driver of a Tesla Inc. electric vehicle with its semiautonomous Autopilot system activated died March 23 when his sport utility crashed into a barrier near Mountain View, Calif. [...]

But Ms. King told a House panel in February that the greatest challenge facing NHTSA officials is more conventional: an urgent recall that Ford Motor Co. issued earlier this year instructing tens of thousands of truck owners to stop driving older vehicles with potentially lethal air bags.

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King’s appointment at the NHTSA would be subject to Senate approval.

5th Gear: South Korean GM Workers Trash CEO’s Office Over Losing Bonuses

After being told there would be no bonuses due to a cash crisis, Automotive News Europe reports that unionized General Motors workers in South Korea stormed their CEO’s office. The employees in the South Korean city of Incheon destroyed and removed furniture from the office while being filmed for a video posted to YouTube, according to the report.

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A spokesperson for GM Korea told Automotive News Europe the employees were protesting the decision and wanted the CEO to resign, and the story said a union representative couldn’t be reached for comment. From the report:

Separately, the company confirmed in a statement what it called a “violent incident” at its executive offices that “resulted in significant damage to company property.”

GM, which is seeking concessions from the union to revive its South Korean business after mounting losses, has proposed a $2.8 billion new investment plan and a $2.7 billion debt-for-equity swap to turn around the unit. After threatening to exit the country altogether earlier, the subsidiary last month said it intends to file for bankruptcy if the union fails to agree to a restructuring plan, putting pressure on employees and the government to help it stay afloat.

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Automotive News Europe reports that GM Korea said the storming of the office was reported to police, and that it’ll take legal action against the employees. The next meeting at the office should go well, all things considered.

Reverse: One Of The First In-Flight Films Is Shown

On April 6, 1925, Imperial Airways showed one of the first in-flight films on one of its airplanes. The Imperial Airways showings weren’t technically the first in-flight films, just the first Hollywood feature films shown on commercial flights, according to Gizmodo. Other, shorter films were probably shown as early as early as 1921—nearly 100 years ago.

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Neutral: Does In-Flight Entertainment Actually Make Flights Better?

If you’re going to sit on a miserably hard seat for however many hours, you may as well just up the pain by being productive rather than trying to enjoy a movie, right?