Negotiations between the UAW and Detroit’s Big Three are already tense, autonomous systems are re-shaping how we produce car parts and trends seen from car inventories. All that and more in The Morning Shift for Monday, July 15, 2019.
1st Gear: Here Are the Big UAW Topics
Negotiations between the United Auto Workers union and the Detroit Three (General Motors, Ford and Fiat Chrysler) begin this week, which will determine the new four-year contracts for almost 150,000 employees. And tensions are high.
Between the scandal within the UAW itself and GM closing a bunch of plants, there are also issues like plummeting car sales, the trade war and the looming threat of automation to consider. It’ll probably get quite ugly. The key discussion issues are as follows, as helpfully laid out by Bloomberg.
Plant protection: This is likely the biggest issue. GM’s plant closures have drawn the ire of not only the union, but also the President, Congress and Democratic candidates. The union’s GM head wants to “secure work” for its members at the closed plants.
Temporary workers: Hiring a temp worker is a quick solution when a company needs someone to cover something fast. But,
GM’s desire to bring on more temp workers is going to run headlong into UAW leadership, who heard an earful during their bargaining convention in March. Members were fired up about limiting use of temps because they’re paid less, are eligible for skimpier benefits and have weaker protections under the union contract.
Healthcare: Members of the UAW apparently have some of the best healthcare benefits in the country, according to the Kaiser Family Foundation. This isn’t cheap for the automakers. An unnamed source at Ford was quoted by the outlet to say that healthcare for its 56,000 hourly employees will exceed $1 billion next year, and that GM pays close to $900 million annually for its U.S. hourly staff.
But healthcare is one of those things you don’t really want to touch. Not unless you want a revolt on your hands, anyway. Automakers are probably going to have to cut somewhere else if they want to save some money.
UAW Corruption: “Fat, dumb and happy” was how former FCA execs wanted the union officials to feel after the FCA-UAW corruption scandal that has been a PR disaster for the UAW. While much of this has been blamed on a few bad individuals, the scandal has no doubt shaken the confidence of members. The union might have to work extra hard to convince its members that it’s fighting for them, Bloomberg predicts.
Strike: In March, UAW President Gary Jones raised strike pay, which should tell automakers that the union means business. A past UAW-advisor told Bloomberg that he believes the union won’t get its preliminary agreement ratified with the companies. How it chooses to escalate and put pressure on from there remains to be seen, with the nuclear option being a strike.
Buckle down, kids. It’s going to be a long ride.
2nd Gear: All-New Parts
For over a hundred years, we’ve driven our own cars. But now that autonomous technology is very much a part of our present, it’s also changing how we manufacture car parts.
As cars become more and more loaded with autonomous features, parts like tires, seats and headlights are being fitted with more and more sensors so the system can monitor as much information as possible as it makes decisions, reports Bloomberg.
For example, Tokyo-based Koito Manufacturing is adding “sensors and artificial-intelligence chips” to headlights it wants to launch by around 2025. The high-tech headlights
will be able to process information and react, such as by illuminating poorly lit crossings, signaling pedestrians that it’s safe to cross and raising an alarm to surrounding drivers by flashing a specific color.
Asahi Glass Co. Ltd. is apparently designing windows that have built-in antennas for 5G connectivity, thus better enabling vehicle-to-vehicle and vehicle-to-infrastructure abilities.
Someday, maybe, we won’t even need headlights anymore. I mean, if the cars are driving themselves already and they’re so loaded with radar and sensors that they already know what’s around them, what would we need to see anything for?
3rd Gear: Inventories Run Short
In the scramble to build crossovers, SUVs and trucks to meet demand, the industry has apparently created a glut of big cars that people aren’t necessarily buying. What the numbers show is that people are still, in fact, buying the smaller cars.
This is from Automotive News, which reports,
Overall, automakers and dealers had an estimated 4,004,700 unsold vehicles to start July, a 69-day supply that was up slightly from the 3,992,100 vehicles on hand at the start of June and roughly flat from a year earlier.
But within that gross number, product moves in recent years by several automakers away from sedans, coupes and hatchbacks — and toward crossovers, SUVs and other light trucks — have begun to play out in the inventories on dealership lots.
There were an estimated 1,008,000 unsold cars to begin July, a 60-day supply, making up just more than 25 percent of total inventory. For comparison, car sales in the U.S. have accounted for 29.4 percent of total sales through the first six months of the year.
Too many light trucks! There might be light at the end of this big car tunnel after all, because it seems like a reasonably steady amount of people are still buying the smaller cars.
4th Gear: More Amazon
I haven’t met one person who has been stoked about having Amazon in their car, but I suppose they’re out there? Anyway, Amazon has plans to keep up with the Alexa expansion in the automotive industry. Joy.
Audi and BMW Group (which includes Mini) will apparently be the first to install Alexa into the software system in their cars, reports Automotive New Europe. From the story:
Audi plans to roll out Alexa gradually across its vehicle fleet, spokeswoman Amelia Fine-Morrison said. Audi launched Alexa on the new e-tron all-electric crossover last year. The next vehicle will be the redesigned Q3, she said.
BMW’s partnership with Amazon for Alexa is about providing a seamless experience between their home devices and their vehicles for their “digital lifestyles,” said Dieter May, BMW’s senior vice president of digital services and business models.
Look, I’m sure Alexa helps with convenience and connectivity and all that, but the thing is a pain in the ass to use. The one I have at home has become a glorified kitchen timer and music player, and it frequently screws up even those two tasks.
5th Gear: EV Rebates
Despite the many attractive EV options currently available to buyers, the majority of them still opt for the gasoline-driven cars. Much of this comes down to cost.
But a lawmaker in California is trying to increase the state’s EV rebates so that people have more of an incentive to go gas-free, reports the Detroit News.
Assemblyman Phil Ting, D-San Francisco, is carrying a bill that would increase state-funded electric car rebates up to as much as $7,500, rising from today’s top rebate of $2,500.
Over time, Ting’s bill would reduce the value of the rebates, giving car buyers an incentive to move faster in switching to electric vehicles.
He says he’s trying to accomplish a goal former Gov. Jerry Brown set last year with a new law that aims to put 5 million zero emission electric vehicles on California roads by 2030.
“The goal would be if we were able to create a large enough market for clean cars that they would be cost competitive with gas cars. We think this bill is a very key component on moving our way into our 5 million clean car future by 2030,” Ting said at a hearing on Tuesday.
The outlet notes that there are only about 600,000 EVs in use in California. And this is because EVs tend to be costlier than ICE cars, which is a major buyer deterrent.
Currently, California’s rebate program provides a $2,500 rebate for BEVs and $1,500 for PHEV, rates that haven’t been updated for over five years. Also, it’s apparently been underfunded sometimes, so buyers have to get put on waiting lists. Nobody likes that.
Ting’s bill, if passed, would mean that the California Air Resources Board needs find a steady stream of funding for the rebates and also determine how much the rebate would be. Electric cars are good! They’re fun to drive.
Reverse: First Order From a Dentist
Ernst Pfenning, a Chicago dentist, becomes the first person to place an order for Henry Ford’s $850, two-cylinder Model A car. Congratulations to him.
Neutral: How Big of a Rebate Would Get You to Switch to an EV?
A rebate of $7,500 is no chump change. Would you be happy with that? Or would you want more?