Not even a deadly virus will stop American car buyers, another UAW guilty plea, and Waymo has raised billions in new investment. All that and more in The Morning Shift for Tuesday, March 3, 2020.
Our own car-buying expert Tom McParland was just saying yesterday that anecdotally he’s heard car showrooms have seen less foot traffic because of coronavirus, which is probably true for many, but dealers Reuters talked to haven’t seen much of an impact.
That’s in stark contrast to Asia, where car sales have dropped significantly because of the virus. Per Reuters:
Larry Laskowski, executive director at the Independent Automobile Dealers Association of California, which represents the state’s roughly 6,000 used car dealers, said the coronavirus has not been an issue for members.
In San Ramon, a city 35 miles east of San Francisco surrounded by counties that have reported coronavirus cases, dealership owner Greg Meier said his business was better than expected this weekend.
“Some people were joking about the virus when they came in this weekend, but no one was panicked or scared,” Meier said.
His remarks were echoed by dealership groups in Texas, Florida and New York.
“The concern that you can catch coronavirus from walking into a dealership is not something we’ve seen,” said Darren Whitehurst, president of the Texas Automobile Dealers Association.
Total U.S. auto sales in February are projected to reach more than 1.3 million vehicles, according to JD Power, up 1.8% from last year.
I don’t think foot traffic in dealerships is necessarily the best indicator of sales, or even interest, since most people do a fair amount of research on their own online these days ahead of big purchases, but we’ll see how car sales do this month.
The Detroit News, as it has been almost since the start of the UAW’s corruption scandal, has the story. Edward “Nick” Robinson admitted Monday to conspiring to embezzle over $1 million alongside other UAW officials. Robinson could get up to three years in prison, but he is cooperating with federal officials as they seek to ensnare former UAW presidents Gary Jones and Dennis Williams. That cooperation could ease Robinson’s prison sentence:
[Personal luxuries] included private villas in Palm Springs, Calif., lavish dinners, golf trips and more than $60,000 spent on cigars.
Robinson, 72, of Kirkwood, Mo., pleaded guilty five months after prosecutors filed a criminal case that elevated the years-long corruption scandal from one involving labor law violations and bribes to what legal sources called outright thievery. The Robinson case includes a failed cover-up, payoffs, labor leaders using burner cell phones and hints at undercover recordings of union officers discussing wrongdoing.
Robinson is the 13th and final person charged so far to plead guilty to criminal charges in a years-long federal crackdown on corruption within the U.S. auto industry. Federal oversight of the UAW is an option once government investigators determine the depths of corruption, a move that could cost tens of millions of dollars, lead to prolonged government control and involve replacing labor leaders.
The EPA said Monday that cars in the 2018 model year averaged a record 25.1 mpg! How much better is that than 2017? All of 0.2 mpg better. That number is less than what Obama-era fuel efficiency standards called for, but several automakers remained compliant by buying credits.
Per the Detroit News:
Automakers were required by the Obama-era mileage rules to achieve a fleetwide average of about 29 miles-per-gallon in “real world” testing for 2018.
Tesla led all automakers for 2018 with an average of 113.7 miles per gallon for its fleet, followed by Honda with an average of 30 miles per gallon. Subaru and Mazda followed with averages of 28.7 miles per gallon and Hyundai rounded out the top five with an average of 28.6 miles per gallon.
Detroit manufacturers lagged behind foreign-owned competition in meeting the stringent fuel economy standards now under review by the Trump administration.
General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles U.S. LLC ranked 12th, 13th and 14th respectively among 14 manufacturers who were measured. GM averaged 23 miles per gallon, while Ford averaged 22.4 and Fiat Chrysler averaged 21.7.
Under the Obama administration’s rules, automakers face fines of $5.50 for each one-10th of a mile-per-gallon their average fuel economy falls short of the standard for a model year, multiplied by the total volume of vehicles sold. Automakers are allowed to purchase credits from other automakers — like electric-car company Tesla — that come in under the mileage requirements.
All of this has been a little complicated by the Trump administration’s attempt to roll back the Obama-era standards, but that continues to blow up in the administration’s face. I’m guessing it will all come to close to nothing eventually in any case, as Trump’s reelection campaign ramps up.
Google’s self-driving startup got $2.25 billion, according to Automotive News, with “further investment expected soon.” The investors include a pretty broad mix of companies that have skin in the self-driving game, now and going forward. Per AN:
Private equity firm Silver Lake Partners led Waymo’s funding round, along with Canada Pension Plan Investment Board and Mubadala Investment Company. The first two will both hold seats on a newly created board that will oversee Waymo. Krafcik and members of Alphabet Inc., Google’s parent company, will also sit on the board.
The infusion of outside investment “is along the evolutionary path we have always imagined,” Krafcik said.
Mubadala is a global investment company based in the United Arab Emirates. Its involvement in the funding round accentuated Waymo’s global ambitions, and Krafcik confirmed that expansion to Middle Eastern markets was a possibility going forward.
Investors also included Alphabet itself, venture capital firm Andreessen Horowitz, global supplier Magna International and auto-retail giant AutoNation, the latter of which invested $50 million, according to a regulatory filing.
It’s a big number to you or me, but $2.25 billion for Waymo is pennies to the dollar of its valuation. The cash infusion really just shows that making (self-driving) cars is hard:
Waymo did not disclose the valuation of the company. Investment bank Morgan Stanley estimated its value was $105 billion in September 2019. A year earlier, the firm had said Waymo was worth $175 billion, but the cut came amid broader industry headwinds on the readiness of self-driving technology.
Yesterday, the Peugeot 208 won European Car of the Year for no discernible reason. Today, Peugeot said its factory in north England may or may not keep running depending on Brexit, according to Reuters.
The French carmaker manufactures models for its Vauxhall and Opel brands at the plant in northwest England and had earmarked it as one of the possible sites to make new Astras.
It has previously warned, however, that Britain’s withdrawal from the European Union could pose a threat for the factory if that process affected its profitability, and Tavares said on Tuesday that negotiations with Brussels over an exit deal would be key.
“The decision will not be taken until we have a clear understanding of the outcome of discussions between the British government and the European Union,” Tavares told journalists on a conference call, which replaced an event planned for this week’s Geneva auto show.
Can’t wait to see what else Peugeot has in store this week.
I have been washing my hands about 25 percent more than usual, but, living in a big city and taking public transportation every day, I’ve already accepted my fate, even if that’s a little irrational.