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 New “Fast-Paced” CEO May Have To Axe Low-Margin Vehicle (i.e. Small Cars)
Ford’s new CEO Jim Hackett has a reputation for adding buoyancy to sinking ships, having had successful stints leading the University of Michigan’s football program and Michigan furniture manufacturer, Steelcase.
And while his current company is far from sinking, Hackett has daunting times ahead of him as he tries to ensure Dearborn’s legendary automaker, Ford, can keep up with an automotive climate heading towards the unknown. Self-driving, shared, electrified automobiles are making headlines at every car show, and Hackett needs to make certain that Ford can compete with established automakers and newcomers alike.
Automotive News has a great story chronicling what Hackett has done, and what he may have to do to accomplish this goal. Among his existing accomplishments, the publication mentions:
Since his May 22 appointment, Hackett has visited line workers at some of the company’s assembly plants, taken multiple trips to Ford’s Silicon Valley offices and traveled to meet with joint venture partners in Russia and Turkey. He has already made some big decisions, including reshuffling Ford’s senior management team, moving Focus production from North America to China and exploring a strategic partnership in India with Mahindra to help share costs there.
But the particularly interesting part of Automotive News’ story delves into some of the near-term product changes Hackett—who was hired, in part, for his ability to make quick decisions—may have to make. The report says Ford’s next chapter “must include shoring up Ford’s bottom line after several quarters of earnings declines and making money on products beyond pickups, SUVs and crossovers, analysts and industry observers say.”
Part of that could mean axing certain models like the Fiesta, with Automotive News writing:
Hackett’s faster decision-making could also spell the end of some lower-margin vehicles, such as the Fiesta subcompact car, Taurus large car and C-Max hybrid and plug-in hybrid hatchback. Automotive News and others have reported that those vehicles won’t survive another product cycle in the U.S.
Margins are everything, and with small cars, margins simply aren’t there. Hackett will brief investors in New York on Oct. 3 with updates on the company’s strategies—hopefully he doesn’t include the confirmation of death of the wonderful Fiesta.
2nd Gear: Jaguar Land Rover May Be Looking To Acquire More Brands
Jaguar Land Rover, the British car company that’s been pumping out some seriously good luxury cars like the Discovery and F-Type since being acquired by Indian company Tata Group, may be looking to buy up other luxury brands in its quest to expand globally.
JLR is allegedly “scouting for acquisitions of international automakers,” Bloomberg reports based on conversations with unnamed sources. The point of JLR’s potential expansion—which doesn’t just involve buying luxury marques, but also tech companies that can assist with EVs and autonomous cars—is to help Jaguar diversify its product portfolio. Bloomberg provides more insight into why JLR may be looking to buy up luxury brands, saying:
Senior officials at JLR’s ultimate owner Tata Group believe the carmaker needs to bulk up to stay competitive, and the Indian conglomerate is willing to provide financial support for potential acquisitions if needed, one of the people said. Any deal would mark the first acquisition by JLR since Tata Motors bought the brands for about $2.4 billion in 2008, data compiled by Bloomberg show.
Who JLR might want to buy is unclear, but Bloomberg does mention Alfa Romeo and Maserati—which FCA is allegedly considering spinning off—as options.
3rd Gear: General Motors Cuts A Shift At SUV Plant Due To Dwindling Demand
Crossover SUV sales are hot right now, but overall car demand is not where it once was. As a result, 1,000 employees working the overnight shift (third shift) will either be laid off or furloughed from General Motors’ Spring Hill Plant in Tennessee, The Associated Press reports.
The plant, which GM opened in 1990 to build Saturns, now puts together the Cadillac XT5 and GMC Acadia, and also functions as an engine assembly (6.2-liter V8, 1.5-liter EcoTec), injection molding, and stamping operation for GM.
On November 27th, some of those operations—particularly vehicle assembly—will slow down due to GM’s oversupply of cars, with AP citing Ward’s Automotive, saying GM has a 105 day supply of Acadias and a 68-day supply of XT5s. Compared with the “optimal” supply of 60, these numbers are too high, and could compromise “brand value.”
To combat this, Tom Wickham—a GM spokesperson—said production has to slow down, telling AP: “Even though crossovers (SUVs) make up a larger share of the industry now, overall volumes are moderating.” The AP points out that overall car sales in the U.S. have dropped 2.7 percent this year through the first eight months of 2017.
The good news, though, is that GM says it will invest $294 million into Spring hill to build a new Cadillac SUV. Whether demand for that vehicle could bring third shift back online isn’t mentioned. But heavy investments into manufacturing plants could eventually be a good thing for workers.
4th Gear: Pumping Money Into Plants
Speaking of automakers investing money into plants despite lower overall sales and rising inventories, Automotive News has a story delving into why pretty much all automakers are doing just that right now.
As examples, the news site mentions Daimler’s announcement to expand its Alabama plant, Volvo’s decision to drop $1 billion on its first U.S. assembly facility in South Carolina, Honda’s recent expansion in Ohio, and the expansion and renovation of Subaru’s Indiana plant and Toyota’s Kentucky plant, respectively.
The reason why automakers are making these investments in a time when the auto industry is in limbo is because they have to. The auto industry is moving and changing, and carmakers have no choice but to adapt. Speaking with Automotive forecaster for LMC Jeff Schuster, Automotive News says the industry “is mutating...not shrinking...and automakers are spending to capitalize on new products.” Shuster told the news site:
There is opportunity out there...We’re in a period of product transformation, with a lot of electrification coming and a shift to more SUVs. You have to invest to catch that wave.
The auto industry may be in times of uncertainty, but it’s definitely changing, and automakers have to make strategic investments to avoid falling behind. Among those investments is manufacturing.
5th Gear: Cadillac Reduces Requirements For Its “Project Pinnacle” Dealership Strategy
Cadillac has been trying to re-vamp its dealership experience via a program called “Project Pinnacle,” whose aim it is to overhaul the brand’s stores so that they can better compete with those of premium luxury automakers.
Project Pinnacle involves separating Cadillac dealerships into tiers based on sales volumes, and providing dealerships with incentives to meet certain brand standards. You can see the required brand standards in the table below:
The program has been scrutinized by dealerships—especially smaller ones—who don’t want to make investments to meet Cadillac’s new standards, and now—according to Automotive News—Cadillac has decided to loosen the leash a bit.
The news site spoke with Cadillac executives, who said “Virtual inventories, 24-hour roadside assistance and brand reputation consultants”—grouped into “reputation management,” “roadside assistance,” and “virtual showroom” in the table above—are no longer a part of the program.
Automotive News describes the revisions in more detail, saying:
The changes range from top-tier dealers not being required to work with “reputation management” companies to the smallest dealers being allowed to keep physical vehicle inventories. A previously reported “exceptions process” also was implemented for the program, which launched April 1...Other notable changes from roughly a year ago include incentives of $28,000 or $30,000 on the purchase of Cadillac Escalade roadside-assistance vehicles (valid on one purchase every three years); a decrease in retail sales performance targets, including the addition of a fourth level; and changes in weighing customer satisfaction indexes.
Defending the new program, Cadillac’s President Johan de Nysschen said:
“We are not our dealers’ enemy...We are here to work together, but it is going to require a shifting in approach over time from both ourselves and our dealer partners.
He went on to tell Automotive News that Project Pinnacle is showing “some very tangible improvements,” and that
“These things take time to flow through the system, but the [combination] of all these shows Pinnacle is working and the money will flow to those who are achieving the numbers.”
One one hand, it will take drastic action for Cadillac dealers to distinguish themselves from Chevy dealers, but on the other hand, I can see how Cadillac dealerships might find Project Pinnacle rather daunting. I mean, just look at Cadillac’s enormous program guide.
Reverse: The Man Who Invented The First “True” Car Is Born
From This Day in Automotive History:
The man who is credited with building the first known working, self-propelled mechanical vehicle capable of carrying a driver was born on this day in 1725. Nicolas-Joseph Cugnot was a French inventor who was trained as a military enginery. He began working in 1765 to develop a steam powered vehicle capable of transporting cannons for the French Army. This led to the 1769 development and running of a small version of a three-wheeled “fardier a vapeur,” or translated to steam dray. A fardier was a massive two wheeled, horse drawn cart used to transport heavy equipment.
Neutral: Who’s Jaguar Land Rover Going To Pick?
Would Sergio Marchionne ever let his babies—Alfa and Maserati—go? If not, which luxury marque might Jaguar Land Rover be looking into acquiring?