Mary Barra is walking into Donald Trump’s lion’s den today, more on the UAW corruption situation, and more drama from Nissan. All of that and other news in The Morning Shift for Thursday, Sept. 5, 2019.
1st Gear: General Motors CEO Mary Barra Is About To Meet With Top Critic, Donald Trump, And It Could Get Awkward
President Donald Trump has been shit-talking General Motors for a while now over shuttering plants in Ohio, over the prospects of the company backing more stringent fuel economy standards despite the Trump Administration’s efforts to ease up, and over operating plants in other countries, especially China.
That’s why a meeting between GM CEO Mary Barra and President Trump, scheduled for today according to Reuters, has potential to be supremely awkward. The news site describes the looming event:
Reuters reported earlier that the pair would discuss issues including trade, ongoing contract talks and revising vehicle fuel efficiency standards, citing three people briefed on the matter. The White House confirmed Trump would meet with Barra at 1:45 p.m. EDT in the Oval Office.
Reuters then brought up a few tweets from the Commander In Chief, specifically this one, which refers to GM as a small manufacturer and criticizes GM’s operations in China.
I think anyone, regardless of political affiliation, probably realizes that this tweet is silly, for reasons that I’ll allow The Detroit News to enumerate:
- GM sold 2.9 million vehicles in the United States in 2018, outpacing the 2.4 million sold by Ford Motor Co. and the 1.7 million sold by Fiat Chrysler Automobiles.
- GM has about 100,000 hourly and salaried employees in the United States. Ford has about 85,000 and Fiat Chrysler has about 62,000.
- GM, in fact, has not “moved” factories to China. Most of the cars it builds there are for the Chinese market. Only one GM vehicle built in China — the Buick Envision — is sold in the United States.
Building cars in China for the Chinese market makes sense for a number of reasons, both financial and political (China has had rules in place that urge foreign companies to build locally). China’s a huge car market, and GM is making lots of cash by selling vehicles there. The Detroit News spoke with a senior economist at Cox Automotive, who explained why GM staying in China makes sense from the company’s standpoint:
“Their production efforts in China are less about trying shift production of U.S.-sold vehicles and more about trying to make money selling Chinese made products to Chinese people.”
Seems fine to me? Maybe Barra will explain this to the president.
Reuters also mentioned this tweet related to emissions rollbacks:
From the news site:
Trump has also warned GM not to join Ford Motor Co (F.N) and three other automakers in backing a voluntary deal with California for stricter fuel economy standards than the Trump administration has proposed.
GM has not backed the agreement, arguing that it does not properly credit the company’s electric vehicles. Even so, Trump tweeted last month the founders of Ford and GM were “‘rolling over’ at the weakness of current car company executives” in the face of fuel efficiency rules.
And then there’s this tweet, which explicitly calls out Barra:
Very disappointed with General Motors and their CEO, Mary Barra, for closing plants in Ohio, Michigan and Maryland. Nothing being closed in Mexico & China. The U.S. saved General Motors, and this is the THANKS we get! We are now looking at cutting all @GM subsidies, including....
— Donald J. Trump (@realDonaldTrump) November 27, 2018
This won’t be the first time the two have met, but with all the shit the president has been talking on GM, it seems like it could easily become the most awkward.
2nd Gear: Former UAW Official Pleads Guilty To Money Laundering And Wire Fraud Charges
The United Auto Workers union is, at least theoretically, meant to protect its members and keep money in their pockets, but instead, some of the organization’s top officials have allegedly been abusing their power to enrich themselves at the expense of members.
One such official charged with money laundering and conspiracy to commit wire fraud actually pleaded guilty yesterday according to the Detroit Free Press, who writes in a new article:
Michael Grimes, a former UAW administrative assistant and executive board member of the UAW-GM Center for Human Resources, pleaded guilty to conspiracy to commit wire fraud and money laundering before U.S. District Judge Bernard Friedman in Ann Arbor.
Grimes is accused of conspiring with other union officials to accept bribes and kickbacks involving millions of dollars in contracts for watches, backpacks and jackets
In 2013, the training center jointly run by General Motors and the UAW ordered 58,000 custom-made watches — enough to give one to every GM hourly worker and have plenty left over.
But they were never handed out. Today, the $4 million order remains packed away in a warehouse near the Detroit River.
Still, federal investigators say, the deal accomplished what it was intended to do. The UAW official who arranged it collected a $250,000 kickback. Two others split $95,000 disguised as payments for “furniture.” That still left well over $1 million in profit for the vendor — a Philadelphia chiropractor who got into the watch business solely to recoup a bad loan he had made to a friend of one of the union officials.
That’s just one of the conspiracies that prosecutors detailed last week when filing wire-fraud and money-laundering charges against Michael Grimes, an assistant in the UAW’s GM department who retired last year. Grimes, who is accused of collecting nearly $2 million in illicit benefits over more than a decade, is the ninth person charged in a corruption investigation by the U.S. Justice Department.
According to the Detroit Free Press, sentencing guidelines call for “a punishment of less than five years in prison” for the man who, per the article “acknowledged, without elaborating on those circumstances, that he knew what he did was wrong.”
The UAW agrees, and in a statement included in the Detroit Free Press’ story referred to what Grimes’ actions as “shocking and absolutely disgraceful.”
3rd Gear: But Remember, UAW Is In The Middle Of Negotiations
Now isn’t a great time for all this UAW corruption nonsense to be in the spotlight—at least, not if you’re the UAW, who is in the middle of negotiation talks with automakers. Specifically, the union is working with GM to establish its new contract.
“Federal corruption probe looms over UAW-GM talks” writes Daniel Howes of the Detroit News, who describes how the union’s scandal might affect contract talks:
Looming over bargaining are the federal machinations and the prospect that a sitting UAW president and other top officers could be among the next indictments. They create an ominous sense of uncertainty, officials on both sides say privately, as UAW and GM bargainers work toward the Sept. 14 expiration of their current four-year deal.
The story continues by mentioning how trust between union members and the officials negotiating with GM may have been compromised by the scandal, stating:
It’s in this confused context that UAW and GM bargainers are charged with delivering a tentative agreement that a majority of the automaker’s 46,000 hourly workers would ratify. Good luck with that: the stench of corruption, suspicion and mistrust will hang over whatever the two sides produce, and no one should be surprised if union members use ratification to register their disgust and vote no.
How can they believe the leadership is working to safeguard the financial interests of members, not their own? How can they be assured the union president touting a so-called “TA” with GM won’t soon be the target of a federal indictment that lists alleged crimes because that’s how the system works? How can they know the “Clean Slate” agenda of reforms isn’t really an after-the-fact effort at a cover-up?
The union has said that it’s instituted reforms, but I can see why members might still have a bad taste in their mouths from it all.
4th Gear: More Nissan Drama
Nissan’s been going through lots of drama since last year. Its former boss, Carlos Ghosn, was given the boot and thrown in jail on charges of financial misconduct in what has been a seemingly never-ending saga, and on top of that, the company’s balance sheet has indicated that Nissan is in a crisis.
But now there appears to be more scandal, this time involving Nissan’s CEO Hiroto Saikawa, who was apparently overpaid to the point where he was in violation of Nissan rules, Reuters reports. From the news site:
An internal investigation found that Saikawa and other executives had received improper compensation, a source with knowledge of the matter told Reuters, raising doubts about Saikawa’s pledge to improve governance in the wake of Ghosn’s arrest last year for alleged financial misconduct.
The improper payments, including tens of millions of yen Saikawa received through the [stock appreciation rights] scheme, were disclosed on Wednesday at a meeting of Nissan’s audit committee, said the source who declined to be identified because the information is not public.
“I am deeply sorry for causing concern,” Saikawa said in a quote Reuters attributes to Japanese news outlet Jiji Press. He also apparently promised to hand over all of the inappropriate stock-related funds he received under what he apparently called a “scheme of the Ghosn era.”
It seems that Saikawa wasn’t aware that there was something wrong, with Reuters writing:
In other comments reported by Kyodo news, Saikawa denied any direct role in the execution of a stock appreciation rights (SAR) scheme and said he thought “proper procedures” had been taken.
This “scheme” apparently involved “tens of millions of yen” according to Reuters’ source, who also told the news site that discussions about disciplinary action will happen at a later board meeting.
5th Gear: Asia-Based Automakers Crushed August
Take a look at your calendar, and you’ll see that the world is now in September. And while that sucks for folks like me in Detroit, who fear for the looming winter, it also means that August sales numbers are out!
Okay, it’s not that exciting—well, unless you’re Honda, Toyota, Hyundai, and Nissan. Then this news is pretty great, with Automotive News writing of those brands’ success:
American Honda Motor Co. led the way with an 18 percent increase over year-earlier figures. Nissan Group advanced 13 percent, followed by Hyundai (12 percent) and Toyota Motor Corp. (11 percent). It was the first time in four years that each of the four big Asian companies were up more than 10 percent in a given month. All of them were aided by strong demand for light trucks.
This is your 1 millionth reminder that America still loves trucks, even if those “trucks” are really mostly just crossovers. You can check out the August sales figures by brand (though not all brands are included) in the Automotive News story, but the gist is that Subaru, Mazda, BMW, Mercedes, Porsche, Audi, Kia and Genesis sold more cars in August of this year than in the same month of last year.
The news site spoke with a Cox Automotive economist to understand the figures:
“August sales are coming in hot as aggressive incentives lifted the market above our forecast,” said Charlie Chesbrough, senior economist at Cox Automotive. “The surprisingly strong numbers may be misleading. Although the retail/fleet mix is not yet known, the strong performance of some vehicle lines suggests heavy fleet activity may have occurred for some brands.”
The automotive publication says analysts attribute sales increases to “healthy job gains and steady economic growth,” and the Labor Day weekend didn’t hurt, either.
Reverse: The Gas Pump And Service Station Are Born
The first gas pump apparently entered this world on this day in 1885 in Indiana. From the American Oil and Gas Historical Society:
S.F. (Sylvanus Freelove) Bowser sold his newly invented kerosene pump to the owner of a grocery store in Fort Wayne, Indiana, on September 5, 1885.
Originally designed to safely dispense kerosene as well as “burning fluid, and the light combustible products of petroleum,” early S.F. Bowser pumps held up to 42 gallons.
Bowser kerosene pumps used marble valves, a wooden plunger and an upright faucet. With the pump’s popular success at Jake Gumper’s grocery store, Bowser formed the S.F. Bowser & Company and patented his invention in late October 1887.
Neutral: What Will Come Of GM’s White House Meeting?
I could see this getting really awkward, but maybe there will be some sort of takeaway? I have no clue what it might be.