Illustration for article titled Car Sales Might Have Finally Leveled Off In The U.S.
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Dealers expect car sales to be bad next year, Fiat Chrysler and Peugeot make it official, and Sergio Marchionne might have been more corrupt than we ever knew. All this and more in The Morning Shift for Wednesday, Dec. 18, 2019.

1st Gear: Dealers Don’t Expect Next Year To Be Great

Car sales remain on track this year to top 17 million, but next year dealers are expecting that number to dip below 17 million for the first time since 2013. This is because, well, new cars are more expensive than ever, and the kinds of lower-cost, small cars that automakers used to sell in volume (but that aren’t as profitable as big trucks and SUVs) are increasingly out of vogue, if automakers are making and selling them at all.

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Bloomberg explains in a wire report:

The National Automobile Dealers Association sees U.S. light-vehicle sales dipping about 1.2% from this year to 16.8 million in 2020, Patrick Manzi, the group’s senior economist, said in a statement Tuesday. New-car prices continue to set record highs, leading consumers to consider manufacturer-certified pre-owned models, he said.

Buying a certified pre-owned car as opposed to new has been the smart move for almost as long as I’ve been alive and maybe longer, and it seems like more people are getting wise to that fact than ever. Leasing a new car could make sense in the right situation, but I can only think of a few situations were straight up buying a new car makes financial sense, though I understand that it isn’t all about money.

That said! If I were in the market for something new these days I’d probably try to persuade a Ford dealer to give me a Fiesta ST for cheap.

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2nd Gear: Sergio Marchionne Was In Deep

Marchionne died last year and was never charged with a crime amid a federal investigation into corruption at the UAW and Fiat Chrysler. According to a new report in The Detroit News, though, Marchionne knew more than a little about what was happening and might have been the one pulling the strings up top.

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Marchionne’s labor boss at FCA was Al Iacobelli, who is now an inmate in federal prison after being convicted of violating federal labor law after prosecutors said he bribed union officials. As the Detroit News reports, he wasn’t going alone:

Iacobelli was not a rogue auto executive breaking labor laws that bar management from giving labor officials money and things of value, his lawyer David DuMouchel said: “Mr. Iacobelli joined an already ongoing conspiracy. The practices and corruption that are the focus of this case started long before Mr. Iacobelli.”

And prosecutors say Iacobelli answered to one person on UAW matters: Fiat Chrysler CEO Sergio Marchionne.

The sweater-clad CEO forged a close relationship with [UAW Vice President General Holiefield], who headed the UAW-FCA Department and led national contract talks with the automaker. Keeping Holiefield happy was a priority for Marchionne and his executive team.

As his team funneled bribes to Holiefield, Marchionne seduced him with gold — a mustard-yellow, limited-edition watch in February 2010, eight months after the Fiat Chrysler bankruptcy concluded.

The Terra Cielo Mare, part of the Italian watchmaker’s line of custom-made timepieces, featured the Fiat logo and retailed for $2,245. At that price, the average UAW member would need to work two weeks on the assembly line to afford one.

The watch came with a hand-written note: “Dear General, I declared the goods at less than fifty bucks. That should remove any potential conflict. Best regards, and see you soon,” according to federal court records obtained by The News.

Federal investigators later asked Marchionne whether he had given UAW leaders valuable items when he was questioned during a secret meeting at the U.S. Attorney’s Office in downtown Detroit in July 2016, sources told The News.

Nope, Marchionne said. Investigators then confronted the CEO with evidence about the timepiece. The meeting ended with Marchionne exposed to federal charges.

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The Detroit News’ lengthy report is worth reading in full, but I’ll just drop one more detail in here. It’s a good reminder that if you’re involved in a massive corruption scheme maybe don’t buy a fuckin’ Ferrari and slap some cheesy vanity plates on it.

In September 2013, Holiefield’s top aide, James Hardy, abruptly left the UAW amid allegations he was selling jobs at Chrysler plants. Hardy cooperated with federal investigators and was never criminally charged. But he gave federal investigators a window into the UAW’s internal affairs, as well as a deeper understanding of how the union’s Fiat Chrysler department was plagued by corruption.

A few months later, on May 15, 2014, Iacobelli walked past palm trees and into the exotic car dealership, Naples Motorsports, in southwest Florida. He zoomed out with a red 2013 Ferrari 458 Spider convertible and installed a “IACOBLI” vanity plate on the $365,482 exotic car.

The conspicuous purchase drew attention from federal investigators who analyzed financial records and determined the Ferrari was purchased with money that was supposed to pay for UAW blue-collar worker training.

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3rd Gear: Fiat Chrysler And Peugeot Make It Official

FCA and Peugeot are merging, you may have heard, and today the two companies announced that they’d signed a binding agreement to make it more or less official. FCA Chairman John Elkann will also be the chairman of the new combined company, with Peugeot CEO Carlos Tavares taking the CEO role.

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Some context, via Automotive News:

The merger will create the world’s fourth-largest automaker with a stock-market value of about $47 billion, surpassing Ford Motor Co. The tie-up also brings together two automaking dynasties — the billionaire Agnelli clan of Italy, led by Elkann, and the Peugeots of France.

[...]

By merging, PSA and FCA aim to achieve annual cost savings of 3.7 billion euros ($4 billion).

Technology-sharing as well as product- and platform-related savings are expected to account for about 40 percent of the annual synergies, the companies said. Purchasing will represent a further estimated 40 percent, benefiting principally from scale and best-price alignment. Other areas, including marketing, IT, general and administrative, and logistics, will account for the remaining 20 percent.

The synergy estimates are not based on any plant closures, the companies said.

The combined company does not have a name yet, though I’m assuming it will be something less letter-salad-y than FCAPSA. All of this means probably very little to you, unless you are an FCA or PSA stockholder or employee, since a special dividend is planned for shareholders and layoffs often occur after huge company mergers. (Tavares, who turned around Opel in Europe, is also known as a cost-cutter, and all that “synergies” language in the blockquote above is often a euphemism for job cuts.)

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What it means for the rest of us is that Peugeot might finally come back to the American market, to make things a bit more interesting here. That part can’t happen soon enough.

4th Gear: Ford Is Investing $1.45 Billion In Michigan Plants

The company says it will hire for 3,000 new jobs as part of the investment, which will go towards new trucks and SUVs, in addition to the company’s electric and autonomous efforts. The money will go to plants in Wayne, Michigan, and in Dearborn. The former plant will make the Ford Ranger and the new Ford Bronco, while the latter will make F-150s, including the upcoming electric version.

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A bit more from the Detroit Free Press:

The company said Tuesday that about $750 million will go the Michigan Assembly Plant in Wayne, where 2,700 jobs will be added during the next three years.

Another $700 million will be invested in the truck plant in Dearborn, where 300 new jobs will be added.

Hiring will begin next year.

In its new deal with the UAW, negotiated this fall, the company has committed to adding or retaining 8,500 jobs with investments at 19 U.S. facilities.

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5th Gear: Tractor-Trailer Makers Are Cutting Jobs As Sales Tank

It seems mostly like a temporary blip in the market after freight companies overbought last year, but that is little consolation if you’re one of the employees taking the hit.

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From Bloomberg:

Navistar International Corp. will reduce global employment by more than 10%, the maker of International brand trucks said Tuesday. The Lisle, Illinois-based manufacturer slashed its forecast for 2020 revenue to below the lowest estimate among analysts surveyed by Bloomberg, sending shares plunging more than 10%, the biggest drop since October 2018.

Navistar follows truck-engine maker Cummins Inc., which announced plans in November to dismiss 2,000 salaried employees as part of a $250M to $300M cost-cutting effort next year, and Meritor Inc., which in September flagged $20 million in severance costs linked to a restructuring the components supplier expects to complete by the end of the year.

Trucking companies ordered too many vehicles last year when freight volumes were growing. That overhang is causing freight prices to drop and orders to plummet. Convoy Inc., a startup that connects shippers with truck drivers, believes the freight industry has been in recession since the fall of 2018, its economist said in an August blog post.

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Reverse: The First Recognized Land-Speed Record

It was in an electric Jeantaud Duc in 1898. The car, driven by Gaston de Chasseloup-Laubat, went the astounding speed of 39.24 mph.

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Here’s an interesting blog about it.

Neutral: Would You Buy A Peugeot In America If You Were Given The Chance?

I would happily take a 308 GTi, which makes 260 horsepower, almost as much as you need.

News Editor at Jalopnik. 2008 Honda Fit Sport.

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