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: Ford’s Still Trying To Figure Out Europe
GM gave up on the market last year, and Ford hasn’t had an easy go of it as late either, leading some to speculate that they may also throw in the towel. But Automotive News says they are here to stay, with renewed attention, despite the challenges.
Figuring out how to make Ford of Europe sustainably profitable has become a priority within the company again after last year’s disappointing performance. Hopes were raised in 2016 when the company recorded a $1.2 billion pretax profit, a stunning turnaround after it lost $3.1 billion in the region from 2011 to 2014. Ford of Europe said two years ago that it wanted to achieve an operating margin of 6 to 8 percent within five years. But Europe’s uniquely tricky marketplace has proved nothing can be certain.
A big reason for the trickiness? Brexit, of course, which has depressed the value of the British pound, cutting into Ford’s profits. That was among other issues.
The company said the weaker pound wiped $600 million from its profits. In its annual report, Ford also blamed its European slowdown on the rising cost of steel, which also affected its U.S. earnings. And the company pointed to the expense of last year’s launch of the new Fiesta subcompact, Ford’s best-seller in Europe. Warranty costs were cited as the fourth drag on profits.
And yet! And yet. Ford thinks the future will be fine.
Despite the headwinds, Ford insists it will remain in Europe for the long term. “We are committed, and we plan to stay,” Ford of Europe President Steve Armstrong told Automotive News Europe. He predicted Ford’s European profits will increase in 2018, despite the challenges.
2nd Gear: A Chinese Brand Will Build A Car In Europe For The First Time
Lynk & Co, which sounds an awful lot like Lincoln, will build cars at a Volvo plant in Ghent, Belgium, according to The Wall Street Journal. Lynk & Co is a joint venture of Volvo and China-based Geely, and introduced its 01 SUV last year. Some of those SUVs will now be built in Europe, as Lynk & Co expands to the market there with a slate of electrified vehicles, including the 02 SUV, said to be a sportier version of the 01.
From the WSJ:
Volvo’s latest models, big sedans and SUVs, are based on a framework for large, premium vehicles that are built in Volvo’s main plant in Gothenburg, Sweden. It moved production of the larger sedans from Ghent to Gothenburg, allowing Volvo to expand production and boost profits at its main plant in Sweden.
Smaller cars, using technology developed for Volvo’s XC40 compact SUV, are now built at Volvo’s Ghent plant. Adding production of the Lynk 01 is aimed at boosting output at the Ghent plant and making the new brand available to European consumers.
By sharing the same underlying technology Volvo will be able to produce the 01 and future Lync models in Ghent on the same production line as the XC40, creating cost savings and allowing the company to ramp up production quickly.
Volvo declined to provide any details about how much it will invest in the Ghent plant, which employs about 5,000 people, to ramp up for Lynk.
3rd Gear: Hyundai’s Union Chief In South Korea Is Mad About Electric Cars
Ha Bu-young, the boss of the Hyundai Motor union, which boasts around 50,000 members, said that electric cars are both job-killers and “evil,” according to Reuters. That former claim is because electric cars don’t need traditional engines or transmissions, which is fewer parts for auto workers to assemble and build. It’s unclear what the latter claim is referring to, since inanimate objects cannot be inherently good or evil, but I digress.
He said that at three of Hyundai’s five plants in Ulsan, the world’s biggest car factory complex, some workers had been asked to take longer holidays as sales of sedans and older model SUVs like the Santa Fe slow in the United States and other markets.
Hyundai Motor and its affiliate Kia Motors (000270.KS) were also hit by diplomatic tensions between Seoul and Beijing last year, leading to a slump in sales in the world’s biggest auto market. The two automakers have flagged only modest global sales growth in 2018.
Longer term, Ha worries about the advent of electric cars, which when they go mainstream could wreak havoc on traditional auto jobs as they don’t require engines and transmissions.
Hyundai’s union has predicted a drastic shift into electric cars could lead to a loss of 70 percent of Hyundai jobs in a worst case scenario.
Much of the anxiety in South Korea for autoworkers has been driven by GM’s decision to lay off workers there in recent weeks and possibly dump the operation altogether.
4th Gear: China Wants Its Own Chips Inside Self-Driving Cars
China imports $276.4 billion in computer chips every year, but it’s now trying to change that, according to Bloomberg.
Horizon Robotics is an example of China’s resolve to move up the manufacturing value chain by focusing less on commodity smartphones and TVs, and more on sophisticated semiconductors and artificial intelligence that can help cars drive themselves or spaceships land on the moon.
“China has to spare no efforts to pick up and develop its own chip technology to improve our own sense of security, especially when the U.S. government is making us fearful about any protectionism against China,” Wei Shaojun, director of the Beijing-based Institute of Microelectronics at Tsinghua University, said at a forum in Shanghai.
China’s push for self-reliance is a priority for President Xi Jinping’s administration, which set up a 200 billion-yuan fund for investments in homegrown chipmakers, Bloomberg News reported.
Overseers of the world’s largest car market — and electric-vehicle market — want to put Chinese-developed chips under those hoods and behind those dashboards. The government expects to have a manufacturing industry for parts such as sensors and embedded chips with a production value exceeding 100 billion yuan by 2020.
U.S.-based Nvidia and Israel-based Mobileye have had a big head start in the sector, but, if there’s anything we’ve learned in recent years, it’s to not underestimate China.
5th Gear: Audi Has Sold A Lot Of Cars In The U.S.
Month-over-month sales have increased for the 100th straight month, which is insane.
Here’s Automotive News:
Sure, there were a few times when the streak came close to ending. In February 2014, Audi notched just four more sales in the U.S. than it had the previous February. In three other months during the streak, the gains were less than 100 vehicles. But all in all, it has been a robust, take-no-prisoners kind of streak. Audi has added at least 6,000 sales in each year of its remarkable run, and twice it added more than 20,000.
Audi went from selling just over 100,000 cars in the U.S. in 2010 to over 200,000 five years later, weathering Dieselgate in the process. Audi’s cars all kind of look the same, but damn if it hasn’t meant $$$$ for them.
Reverse: Jaguar And Land Rover Sold, Again
Neutral: Why Would Anyone Buy A Ford In Europe?
Get a Fiat 500 Abarth, the only correct car-buying decision.